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
Check the appropriate box:
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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 |
Hercules Offshore, Inc.
(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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HERCULES
OFFSHORE, INC.
9 Greenway Plaza,
Suite 2200
Houston, Texas 77046
NOTICE OF
2011 ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 10,
2011
To the Stockholders
of Hercules Offshore, Inc.:
The annual meeting of stockholders of Hercules Offshore, Inc.
will be held on May 10, 2011, at 8:00 a.m., local
time, at the Renaissance Hotel, 6 Greenway Plaza East, Houston,
Texas, for the following purposes:
1. To elect three directors to the class of directors whose
term will expire at the 2014 Annual Meeting of Stockholders;
2. To conduct a non-binding advisory vote on the
compensation of the Companys named executive officers, as
disclosed pursuant to Item 402 of
Regulation S-K
(the 2010 executive compensation);
3. To conduct a non-binding advisory vote on the frequency
of the stockholder vote on our executive compensation;
4. To approve the amended and restated Hercules Offshore
2004 Long-Term Incentive Plan, increasing the number of shares
of Hercules common stock available for issuance under the plan
by 5,000,000 shares;
5. To ratify the appointment of Ernst & Young LLP
as our independent registered public accounting firm for the
year ending December 31, 2011; and
6. To transact such other business as may properly come
before the meeting or any adjournments or postponements thereof.
Attached to this notice is a proxy statement setting forth
information with respect to the above items and certain other
information.
The board of directors has fixed the close of business on
March 14, 2011 as the record date for the determination of
stockholders entitled to notice of and to vote at the annual
meeting or any adjournment or postponement thereof. Only holders
of record of our common stock at the close of business on the
record date are entitled to notice of and to vote at the
meeting. For a period of ten (10) days prior to the
meeting, a complete list of such stockholders will be available
at our executive offices for inspection by stockholders during
normal business hours for proper purposes.
Your vote is important. All stockholders are cordially invited
to attend the meeting. We urge you, whether or not you
plan to attend the meeting, to vote your shares electronically
on the Internet, by telephone or by completing, signing, dating
and mailing the enclosed proxy card in the postage-paid envelope
provided. If a stockholder who has submitted a proxy
attends the meeting in person, such stockholder may revoke the
proxy and vote in person on all matters submitted at the meeting.
By Order of the Board of Directors
James W. Noe
Senior Vice President, General Counsel,
and Chief Compliance Officer
Houston, Texas
March 25, 2011
Proxy
Statement for the
2011 Annual Meeting of Stockholders of
HERCULES OFFSHORE, INC.
To Be Held on May 10, 2011
TABLE OF
CONTENTS
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HERCULES
OFFSHORE, INC.
9 Greenway Plaza,
Suite 2200
Houston, Texas 77046
PROXY
STATEMENT
For 2011 Annual Meeting of Stockholders
To Be Held on May 10,
2011
GENERAL
This proxy statement is furnished to stockholders of Hercules
Offshore, Inc. in connection with the solicitation of proxies by
our board of directors for use at the annual meeting of
stockholders to be held on May 10, 2011, or at any
adjournment or postponement thereof, at the time and place and
for the purposes specified in the accompanying notice of annual
meeting. The mailing of the Notice of Internet Availability of
Proxy Materials to stockholders will commence on or about
March 29, 2011.
Proxies
and Voting Instructions
If you hold shares of our common stock in your name, you may
vote your shares in a number of ways:
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electronically via the Internet at
www.proxyvote.com,
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by telephone, if you are in the U.S. and Canada, by calling
1-800-690-6903, or
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by completing, signing and dating your proxy card and mailing it
in the postage-paid envelope provided.
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If you hold shares of our common stock through someone else,
such as a bank, broker or other nominee, you will receive voting
instructions from the organization holding your account. You
will receive a Notice Regarding the Availability of Proxy
Materials that will tell you how to access our proxy materials
and vote your shares via the Internet. It also will tell you how
to request a paper or
e-mail copy
of our proxy material.
You may revoke your proxy at any time prior to its exercise by:
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giving written notice of the revocation to our corporate
secretary;
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appearing and voting in person at the annual meeting; or
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delivering a later-dated proxy card to our corporate secretary
at the address above.
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Your attendance at the annual meeting in person without voting
will not automatically revoke your proxy. If you hold shares
through someone else, such as a bank, broker or other nominee,
and you desire to revoke your proxy, you should follow the
instructions provided by your nominee.
Voting
Procedures and Tabulation
We will appoint one or more inspectors of election to act at the
annual meeting and to make a written report thereof. The
inspectors will ascertain the number of shares outstanding and
the voting power of each, determine the shares represented at
the annual meeting and the validity of proxies and ballots,
count all votes and ballots, and perform certain other duties.
The determination of the inspectors as to the validity of
proxies will be final and binding.
All properly executed written proxies delivered pursuant to this
solicitation, and not later revoked, will be voted at the annual
meeting in accordance with the instructions given in the proxy.
Stockholders should vote their shares on the enclosed proxy
card. If no choice is indicated, proxies that are signed and
returned will be voted
FOR the election of all director nominees,
FOR the approval, on an advisory basis, of 2010
executive compensation, FOR every one
(1) year, on an advisory basis, in respect of the
frequency of the stockholder vote on executive compensation,
FOR approval of the amended and restated Hercules
Offshore 2004 Long-Term Incentive Plan, and FOR
approval of the ratification of the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for the year ending December 31, 2011, and
in the discretion of the proxies as to all other matters
properly brought before the meeting. All shares of our common
stock represented by properly executed and unrevoked proxies
will be voted if such proxies are received in time for the
meeting.
The three nominees for director who receive the greatest number
of votes cast at the meeting will be elected as directors.
Cumulative voting is not permitted in the election of directors.
Approval of our 2010 executive compensation, determination of
the frequency of the stockholder vote on executive compensation,
approval of the amended and restated Hercules Offshore 2004
Long-Term Incentive Plan, and the ratification of the
appointment of Ernst & Young LLP as our independent
registered public accounting firm for the year ending
December 31, 2011 are each subject to the approval of a
majority of the shares of common stock voting on the matter.
Broker non-votes are proxies submitted by brokers that do not
indicate a vote for a proposal because they do not have
discretionary voting authority and have not received
instructions as to how to vote on the proposal. Abstentions and
broker non-votes are counted as present in determining whether
the quorum requirement for the annual meeting is satisfied. For
purposes of determining the outcome of any matter to be voted
upon as to which the holder has abstained or as to which the
broker has physically indicated on the proxy that the broker
does not have discretionary authority to vote, these shares will
be treated as not voting with respect to that matter.
With regard to the election of directors, votes may be cast in
favor of or withheld from each nominee. Votes that are withheld
will be excluded entirely from the vote and will have no effect.
With regard to the advisory vote on our 2010 executive
compensation, votes may be cast in favor, against or abstain.
With respect to the advisory vote on the frequency of the
stockholder vote on executive compensation, votes may be cast
for one year, two years, three years or abstain. With regard to
the approval of the amended and restated Hercules Offshore 2004
Long-Term Incentive Plan, votes may be cast in favor, against or
abstain. Votes to abstain will be excluded entirely from the
vote and will have no effect. Broker non-votes will be treated
as set forth below in the section entitled Effect of Not
Casting Your Vote.
With regard to the proposal to ratify the appointment of
Ernst & Young LLP as our independent registered public
accounting firm for 2011, abstentions and broker non-votes will
not affect the outcome of the voting on the proposal.
Effects
of Not Casting Your Vote
If you hold your shares in street name, it is critical that you
cast your vote if you want it to count in the election of
directors, approval of 2010 executive compensation, frequency of
the stockholder vote on executive compensation and approval of
the amended and restated Hercules Offshore 2004 Long-Term
Incentive Plan (Items 1, 2, 3 and 4 of this Proxy
Statement). Recent changes in regulation limit the ability of
your bank or broker to vote your uninstructed shares on a
discretionary basis. Thus, if you hold your shares in street
name and you do not instruct your bank or broker how to vote, no
votes will be cast on your behalf except on discretionary
matters. 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.
VOTING
SECURITIES
Our only outstanding voting securities are shares of our common
stock. Only holders of record of our common stock at the close
of business on March 14, 2011, the record date for the
annual meeting, are entitled to notice of and to vote at the
annual meeting. On the record date for the annual meeting, there
were 116,604,364 shares outstanding and entitled to be
voted at the annual meeting. A majority of such shares, present
in person or represented by proxy, is necessary to constitute a
quorum. Each share is entitled to one vote.
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IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS
FOR THE STOCKHOLDERS MEETING TO BE HELD ON MAY 10,
2011
This proxy statement and our 2010 annual report to stockholders
are available at the following address on the internet:
http://www.proxydocs.com/hero.
Pursuant to rules adopted by the Securities and Exchange
Commission, or SEC, we have elected to provide access to our
proxy materials over the Internet. Accordingly, we are sending a
Notice Regarding the Availability of Proxy Materials to certain
of our stockholders of record and beneficial owners (excluding
those record and beneficial owners who have previously requested
that they receive electronic or paper copies of our proxy
materials). All stockholders will have the ability to access our
proxy materials on the website referred to above and in the
Notice Regarding the Availability of Proxy Materials. In
addition, stockholders may request to receive proxy materials in
printed form by mail or electronically by email on an ongoing
basis.
3
ELECTION
OF DIRECTORS
(Item 1 on Proxy Card)
Our certificate of incorporation provides for three classes of
directors serving staggered three-year terms. There are three
Class III directors whose terms expire at the 2011 annual
meeting: Thomas N. Amonett, Thomas J. Madonna and F. Gardner
Parker. The nominating and governance committee of our board of
directors has approved, and our board has unanimously nominated,
each of Mr. Amonett, Mr. Madonna and Mr. Parker
for reelection as directors of Hercules Offshore to serve until
the 2014 annual meeting of stockholders or until his successor
is elected and qualified. If any of the nominees becomes
unavailable for any reason, which is not anticipated, the board
of directors in its discretion may designate a substitute
nominee. If you have filled out the accompanying proxy card in
favor of the unavailable nominee, your vote will be cast for the
substitute nominee designated by the board of directors.
The directors nominated for election this year will be elected
by a plurality of the shares of our common stock present in
person or represented by proxy at the annual meeting and
entitled to vote. In other words, the three nominees for
director who receive the greatest number of votes cast at the
meeting will be elected as directors. All duly submitted and
unrevoked proxies will be voted for the nominees selected by our
board, except where authorization to do so has been withheld.
Board
Recommendation
Our board recommends that stockholders vote FOR the election
of its nominees for director.
Board of
Directors
Information with respect to the directors nominated for election
this year, and the directors whose terms do not expire at the
2011 annual meeting, is presented below.
Nominees
for Election as Class III Directors (Term Expiring in
2014)
Current
Class III
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Thomas N. Amonett,
age 67, director since 2007 |
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Mr. Amonett served as a director of TODCO from May 2004
until TODCOs acquisition by Hercules Offshore in July
2007. He was appointed lead independent director of TODCO in
October 2004 and was appointed Chairman of TODCO in February
2005. He has been President and Chief Executive Officer of
Champion Technologies, Inc., a manufacturer and distributor of
specialty chemicals and related services, since 1999. From
November 1998 to June 1999, he was President, Chief Executive
Officer and a director of American Residential Services, Inc., a
company providing equipment and services relating to residential
heating, ventilating, air-conditioning, plumbing, electrical and
indoor air quality systems and appliances. From July 1996 until
June 1997, Mr. Amonett was Interim President and Chief
Executive Officer of Weatherford Enterra, Inc., an oilfield
services and manufacturing company. Mr. Amonett also serves
as a director and member of the audit committee and nominating
and governance committee of Orion Marine Group, Inc., a marine
contractor, and a director and member of the executive
compensation committee and the audit committee of Bristow Group
Inc., a global provider of helicopter services. |
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As noted above, Mr. Amonett previously served as a director
of TODCO. |
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Thomas J. Madonna,
age 64, director since 2005 |
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Mr. Madonna has been Chief Financial Officer of Menil
Foundation, Inc., a major art museum, since July 2007. From
November 2002 until July 2007, he served as the Manager of
Finance of Menil Foundation, Inc. From 1969 until December 2001,
Mr. Madonna worked at PricewaterhouseCoopers LLP in a
number of roles, including as Assurance Partner from 1982 until
his retirement in 2001. |
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F. Gardner Parker,
age 69, director since 2005 |
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From 1970 until 1984, Mr. Parker worked at
Ernst & Ernst (now Ernst & Young LLP), an
accounting firm, and was a partner at that firm from 1978 until
1984. Mr. Parker served as Managing Outside
Trust Manager with Camden Property Trust, a real estate
investment trust, from
1998-2005
and still serves as a Trust Manager of Camden Property
Trust. He serves as a director, Chairman of the Board and member
of the audit committee of Sharps Compliance Corp., as a director
and Chairman of the Board of Triangle Petroleum Corporation, and
as a director and chairman of the audit committee and
compensation committee of Carrizo Oil & Gas, Inc.
Mr. Parker is board certified by the National Association
of Corporate Directors. |
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Mr. Parker previously served as a director of Blue Dolphin
Energy Company from
2004-2007
and Pinnacle Gas Resources, Inc. from 2003 to 2011. |
Directors
Not Standing for Election
Class I
Directors (Term Expiring in 2012)
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Suzanne V. Baer,
age 63, director since 2007 |
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Ms. Baer served as a director of TODCO from May 2005 until
TODCOs acquisition by Hercules Offshore in July 2007.
Ms. Baer served as Executive Vice President and Chief
Financial Officer of Energy Partners Ltd., an independent oil
and natural gas exploration and production company focused on
the
shallow-to-moderate
depth waters of the Gulf of Mexico, from April 2000 until her
retirement in April 2005. From July 1998 until March 2000,
Ms. Baer was Vice President and Treasurer of Burlington
Resources Inc., an independent oil and natural gas exploration
and production company, and, from October 1997 to July 1998, was
Vice President and Assistant Treasurer of Burlington Resources
Inc. Ms. Baer also serves as a director and chairman of the
audit committee of Lufkin Industries, Inc. |
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As noted above, Ms. Baer previously served as a director of
TODCO. |
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John T. Rynd,
age 53, director since 2008 |
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Mr. Rynd became Chief Executive Officer and President of
Hercules Offshore in June 2008 and was appointed by the Board as
a director in June 2008. From July 2007 to June 2008, he was
Executive Vice President and Chief Operating Officer of Hercules
Offshore. From October 2005 to July 2007, he was Senior Vice
President of Hercules Offshore and President of Hercules
Drilling Company, LLC. Prior to joining Hercules Offshore,
Mr. Rynd worked at Noble Drilling Services Inc., a wholly
owned subsidiary of Noble Corporation, a contract drilling
company, as Vice President Investor Relations from
October 2000 to September 2005 and as Vice President
Marketing and Contracts from September 1994 to September 2000.
From June 1990 to September 1994, Mr. Rynd worked for
Chiles Offshore Corporation, a contract drilling company, in
various positions, including as Vice President
Marketing. |
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Steven A. Webster,
age 59, director since 2005 |
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Mr. Webster has been Co-Managing Partner of Avista Capital
Partners LP, a partnership which he co-founded that focuses on
private equity investments in energy, media, healthcare and
other industries, since June 2005. From 2000 to June 2005, he
served as Chairman of Global Energy Partners, an affiliate of
Credit Suisses private equity business. From 1998 to 1999,
he served as President and Chief Executive Officer of R&B
Falcon Corporation, a marine contract drilling company. From
1988 to 1997, Mr. Webster was Chairman and Chief Executive
Officer of Falcon Drilling Company Inc., a company he founded.
Mr. Webster has been a financial intermediary since 1979
and an active investor since 1984 in the energy sector. He
serves as Chairman of Carrizo Oil & Gas, Inc. and
Basic Energy Services, Inc. He is also a trust manager of Camden
Property Trust and a director of Geokinetics Inc. and SEACOR
Holdings Inc. |
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Mr. Webster previously served as a director of Brigham
Exploration from
2000-2007,
Goodrich Petroleum from
2003-2007,
Encore Bancshares from
2000-2009,
Solitario Royalty & Exploration from
2006-2009,
Grey Wolf Inc. from
1996-2008,
Pinnacle Gas Resources from
2003-2009,
Crown Resource Corporation from
2001-2006,
and Seabulk International from
2002-2006. |
Class II
Directors (Term Expiring in 2013)
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Thomas R. Bates, Jr.,
age 61, director since 2004 |
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Mr. Bates has served as a director of Hercules since 2004
and has served as Chairman of our Board of Directors since 2009.
Mr. Bates has been a Senior Advisor at Lime Rock Management
LP, an energy-focused private equity firm, since January 2010.
From October 2001 until December 2009, Mr. Bates was a
Managing Director at Lime Rock Management LP. From February 2000
through September 2001, Mr. Bates was a business
consultant. From June 1998 through January 2000, Mr. Bates
was President of the Discovery Group of Baker Hughes
Incorporated, an oilfield services company. From June 1997 to
May 1998, he was President and Chief Executive Officer of
Weatherford Enterra, Inc., an oilfield services company. From
March 1992 to May 1997, Mr. Bates was President of Anadrill
at Schlumberger Limited, an oilfield services company.
Mr. Bates was Vice President of Sedco Forex at Schlumberger
from February 1986 to March 1992. Mr. Bates has been an
Adjunct Professor in the Management Department of the Neeley
School of Business at Texas Christian University since January
2011. |
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Mr. Bates previously served as a director of NATCO Group,
Inc. from
2003-2009,
as a director of T-3 Energy Services, Inc. from 2007 until it
was acquired in January 2011, and as a director of Reservoir
Exploration Technology ASA from December 2008 until February
2011. |
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Thomas M Hamilton,
age 67, director since 2007 |
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Mr. Hamilton served as a director of TODCO from May 2004
until TODCOs acquisition by Hercules Offshore in July
2007. He served as the Chairman, President and Chief Executive
Officer of EEX Corporation from January 1997 until his
retirement in November 2002. From 1992 to 1997,
Mr. Hamilton served as Executive Vice President of Pennzoil
Company and as President of Pennzoil Exploration and Production
Company. Mr. Hamilton was a director of BP Exploration,
where he served as Chief Executive Officer of the Frontier and
International |
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Operating Company of BP Exploration from 1989 to 1991 and as the
General Manager for East Asia/Australia/Latin America from 1988
to 1989. From 1985 to 1988, he held the position of Senior Vice
President of Exploration at Standard Oil Company, prior to its
being merged into BP. Mr. Hamilton is also a director and
member of the audit and compensation committees of FMC
Technologies Inc., Non-Executive Chairman of Methanex
Corporation, and a director, member of the compensation
committee and chairman of the nominating and governance
committee of HCC Insurance Holdings Inc. |
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Mr. Hamilton previously served as a director of TODCO from
2004-2007
and of Western Gas Resources from January 2006 until it was
acquired in August 2006. |
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Thierry Pilenko,
age 53, director since 2006 |
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Mr. Pilenko has been Chairman and Chief Executive Officer
of Technip, a provider of engineering, technologies and
construction services for the oil, gas and petrochemical
industries, since April 2007. From March 2004 to January 2007,
Mr. Pilenko was Chairman and Chief Executive Officer of
Veritas DGC Inc. From 2001 to March 2004, Mr. Pilenko
served as managing director of SchlumbergerSema, a Schlumberger
Ltd. company located in Paris. From 1998 to 2001, he was
president of Geoquest, another Schlumberger Ltd. company located
in Houston, Texas. Mr. Pilenko was employed by Schlumberger
Ltd. and its affiliated companies in various parts of the world,
beginning in 1984, in a variety of progressively more
responsible operating positions. |
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Mr. Pilenko previously served as a director of Veritas DGC
from
2004-2007
and of CGG Veritas from
2007-2010. |
7
ADDITIONAL
INFORMATION REGARDING THE BOARD OF DIRECTORS
Board
Independence
It is the policy of our board of directors that a substantial
majority of the members of our board qualify as
independent directors in accordance with the
qualification requirements of the NASDAQ Global Select Market.
It is also the policy of our board that all of the members of
our audit committee, compensation committee, and nominating and
governance committee qualify as independent
directors in accordance with the qualification
requirements of the NASDAQ Global Select Market, and that all of
the members of the audit committee satisfy the criteria for
independence under applicable provisions of the Securities
Exchange Act of 1934 and SEC rules. Our board has determined
that all of our directors and nominees for director, except
Mr. Rynd, who is employed by Hercules Offshore, satisfy the
independence standards of the NASDAQ Global Select Market. Our
board also has determined that each member of the audit
committee qualifies as independent under
Rule 10A-3
under the Securities Exchange Act of 1934.
In determining that each such director is independent, the board
considered that Hercules Offshore and its subsidiaries in the
ordinary course of business sell services to, or purchase
products and services from, companies in which some of the
directors have a direct or indirect ownership interest, or are
or have been employed as officers or serve as directors.
In determining Mr. Hamiltons independence, our board
considered Mr. Hamiltons position as a director of
HCC Insurance Holdings Inc. (HCC). In 2010, Hercules
Offshore purchased director and officer liability insurance and
rig package insurance from certain of HCCs subsidiaries.
In determining Mr. Bates independence, our board
considered his position as principal and senior advisor of Lime
Rock Management LP (Lime Rock). In 2010, Hercules
purchased products and services from certain of Lime Rocks
portfolio companies.
Hercules Offshore considers each of these business relationships
to be at arms-length and in the ordinary course of business. The
board determined that Messrs. Hamilton and Bates do not
have a material direct or material indirect interest in any of
such business relationships.
Board
Committees and Meetings
We have a standing audit committee, compensation committee, and
nominating and governance committee of the board of directors.
Each of these committees operates under a written charter that
has been adopted by the respective committee and by our board.
The charters are published under the Corporate
Governance section of our website at
www.herculesoffshore.com.
The current members of the committees, the number of meetings
held by each committee in 2010 and a description of the
functions performed by each committee are set forth below:
Audit Committee (6 meetings). The current
members of the audit committee are Suzanne V. Baer, Thomas J.
Madonna (chair) and F. Gardner Parker. Mr. Madonna was
appointed as chairman of the committee in June 2010. The
committees purpose is to assist the board of directors in
overseeing our accounting and financial reporting processes, the
audits of our financial statements and our internal control over
financial reporting. In addition, the audit committee is
directly responsible for the appointment, compensation,
retention and oversight of the work of our independent
registered public accounting firm. The board of directors has
determined that each member of our audit committee qualifies as
an audit committee financial expert, as such term is
defined in SEC rules. The board of directors also has determined
that each member of the audit committee qualifies as
independent under
Rule 10A-3
under the Securities Exchange Act of 1934.
Compensation Committee (7 meetings). The
current members of the compensation committee are Thomas M
Hamilton (chair), F. Gardner Parker and Thierry Pilenko. The
purposes of the committee are, among other things, to discharge
the responsibilities of the board relating to the compensation
of our Chief Executive Officer and other executive officers, to
administer our equity-based compensation plans and to review and
approve our objectives and elements of executive compensation.
8
The compensation committee annually reviews the performance of
our Chief Executive Officer and makes compensation decisions
regarding the Chief Executive Officer based on that review. The
Chief Executive Officer annually reviews the performance of each
of the other executive officers and, based on this review, makes
recommendations to the committee with respect to their
compensation. The recommendations, including with respect to
salary adjustments, bonus percentages, equity awards and
perquisites, are presented to the committee by our Chief
Executive Officer and President, and our Vice President of Human
Resources. The committee can exercise its discretion in
determining adjustments to the recommended salary, bonus
percentages, perquisites or equity awards to the executive
officers. The committee approves the elements of compensation
relevant to Chief Executive Officer and executive officer
compensation based on, among other information, advice from a
compensation consultant, established corporate goals and
objectives, company performance targets, personal performance
objectives, and the compensation paid by the companys
competitors.
In addition, the responsibilities of the compensation committee
include, among other things:
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to consider and take action on the adoption of and changes to
our incentive compensation plans, equity-based compensation
plans and other benefit plans;
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to administer our compensation plans that it is assigned
responsibility to administer;
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to review the compensation and benefits of nonemployee directors
and to approve, or make recommendations to the board of
directors with respect to, any changes in such compensation and
benefits;
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to review and approve any equity-based plans and awards that are
not subject to stockholder approval;
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to approve employment, severance,
change-of-control
and retention agreements, and amendments for executive officers;
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to make recommendations to the board of directors regarding the
adoption or modification of any stock ownership guidelines
applicable to executive officers and directors;
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to administer and provide oversight of our policy regarding the
timing and pricing of equity-based compensation awards;
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to monitor compensation programs for executive officers to align
executive compensation and company performance;
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to appraise the performance of, and to provide feedback to, the
Chief Executive Officer; and
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to develop and make recommendations to the board regarding
succession plans for our Chief Executive Officer and to review,
based on the recommendations of the Chief Executive Officer, the
succession plans for other key executive officers and members of
management.
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Nominating and Governance Committee (3
meetings). The current members of the nominating
and governance committee are Thomas N. Amonett (chair), Thomas
J. Madonna and Steven A. Webster. Mr. Amonett was appointed
as chairman of the committee in June 2010. The purposes of the
committee are, among other things, to identify and recommend
individuals qualified to become board members consistent with
criteria approved by the board, to assist the board in
determining the composition of the board and its committees, to
develop, implement and review our corporate governance
guidelines, practices and procedures, to oversee the
companys international anti-corruption, ethics and
compliance programs, and to oversee a process to assess board
and committee effectiveness.
In assessing the qualifications of prospective nominees to our
board of directors, the nominating and governance committee
considers factors it deems relevant, including each
nominees general understanding of marketing, finance,
accounting, or other elements relevant to the success of a
publicly traded company in the current business environment,
understanding of our business on an operational level,
integrity, education and professional background, and
willingness to devote time to the board of directors
duties. In addition, the committee evaluates each individual in
the context of the board of directors as a whole, with the
objective of recommending individuals that can best perpetuate
the success of our business and represent stockholder interests
through the exercise of sound business judgment using their
diversity of experience in these various areas. The nominating
and governance committee does not specifically consider
diversity in regards to ethnicity, gender, race, or age in
assessing the
9
qualifications of director nominees nor does it have a policy
regarding diversity of nominee candidates. However, as stated
above, the committee does consider the diversity of professional
experiences and background of nominees, both individually, and
in the context of the whole board.
The nominating and governance committee will consider director
candidates recommended by stockholders. If a stockholder wishes
to recommend a director for nomination by the committee, the
stockholder should submit the recommendation in writing to the
Chair, Nominating and Governance Committee, in care of the
Corporate Secretary, Hercules Offshore, Inc., 9 Greenway Plaza,
Suite 2200, Houston, Texas 77046. In accordance with our
Policy Regarding Director Recommendations by Stockholders, which
can be found under the Corporate Governance section
of our website at www.herculesoffshore.com, the
recommendation should contain the following information:
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the name, age, business address and residence address of the
nominee and the name and address of the stockholder making the
nomination;
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the principal occupation or employment of the nominee;
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the number of shares of each class or series of our common stock
beneficially owned by the nominee and the stockholder;
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the written consent of the nominee to have such nominees
name placed in nomination at the meeting and to serve if
elected; and
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any other information the stockholder may deem relevant to the
committees evaluation.
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Candidates recommended by stockholders are evaluated on the same
basis as candidates recommended by the board of directors,
executive officers, third-party search firms or other sources.
In 2010, our board of directors held eight meetings. Each
director attended at least 75% of the total number of meetings
of the board of directors and of the committees of the board on
which he or she served. Directors are expected to attend
meetings of the board of directors and meetings of committees on
which they serve and to spend as much time and meet as
frequently as necessary to properly discharge their
responsibilities. In addition, directors are expected to attend
annual meetings of our stockholders. All of our directors who
were serving as directors at our 2010 annual meeting of
stockholders attended that meeting.
Compensation Committee Interlocks and Insider
Participation. None of our executive officers
have served as a member 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.
Structure
of the Board of Directors and Role in Risk Oversight
Board
Leadership Structure
Our board is comprised of individuals who possess substantial
experience in the oil and gas and oilfield services industries,
as well as significant financial, management and capital markets
experience. Our chairman is the presiding director at each of
our board meetings.
Since our inception, the roles of our chief executive officer
(who is also our president) and our chairman of the board have
been separated, which we believe is the best governance model
for Hercules at this time. Our chief executive officer is
primarily responsible for managing our
day-to-day
operations and implementing our strategic initiatives. Our board
chairman is an independent director who interfaces with our
other board members to provide objective guidance on our
strategy and performance, approves the agendas for all board
meetings and sees that the objectives of the board are carried
into effect by management.
Under this model, we believe that separating these positions
enables our chief executive officer to concentrate his efforts
on managing our operations and strengthening our business, while
the chairman assures that our overall performance and strategy
objectives are being met and that management has the support it
needs from the board to carry out Hercules strategic
initiatives. Especially in this challenging business
environment, the separation of these
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roles has enabled our chairman and chief executive officer,
respectively, to efficiently and effectively work toward
achieving their respective strategic and operational objectives
to the benefit of our shareholders.
Director
Qualifications
Each of our directors possesses certain experience,
qualifications, attributes and skills, as further described
below, that led to our conclusion that he or she should serve as
a member of our Board of Directors.
Mr. Bates was appointed chairman of the board in 2009. In
connection with his appointment, Mr. Bates resigned from
each of the committees on which he served to focus on his role
as chairman. Mr. Bates has extensive management experience
during his long career in the oilfield services industry, having
served as President of the Discovery Group of Baker Hughes Inc.,
President and Chief Executive Officer of Weatherford Enterra,
Inc., and as President of Anadrill at Schlumberger Limited,
among other positions. Mr. Bates also lends significant
investment and capital markets experience gained from his time
as a managing director and senior advisor of Lime Rock
Management LP. He also served as a director of two other public
companies until the first quarter of 2011. We believe that
Mr. Batess vast and diverse professional experience
provides great benefit to the board and to the company in his
role as chairman.
Our committees are designed to leverage the relevant knowledge
and expertise of our directors. The chairman of our audit
committee, Mr. Madonna, has significant experience in both
the public and private accounting sector, specializing in the
international energy and oilfield industries. He worked for more
than thirty years for a major accounting firm, including twenty
years as a partner, and has for the last nine years held senior
finance positions with a Houston-based foundation. We believe
Mr. Madonnas varied and continued experience in both
public and private sector accounting allows him to effectively
oversee the audit process of the Company and facilitate the
accomplishment of the audit committees purposes.
Ms. Baer, also a member of our audit committee, has spent
her entire career in investor relations, finance and accounting
positions, most recently serving as chief financial officer of
an upstream natural gas company. Ms. Baer also has been a
director and serves on the audit committee (including currently
as chairperson) of another public company since August 2005.
The third member of our audit committee, Mr. Parker, also
has significant experience in the public accounting sector,
working for fifteen years (six as a partner) for a major
accounting firm. In addition, he serves as chairman of the board
of two public companies and on the audit committee of three
public companies and until June 2010 served as the chairman of
our audit committee.
All three members of our audit committee have been designated by
the Board and are qualified as financial experts.
Two members of our compensation committee have served or are
currently serving as chief executive officer of a publicly
traded company in industries related to ours. Mr. Hamilton,
the chairman of our compensation committee, has extensive
executive management experience in the energy industry,
including serving as chief executive officer and president of an
exploration and production company for almost six years. In
addition, he currently serves as a director of three other
public companies and on the compensation committee of two of
these companies. We believe that Mr. Hamiltons
leadership roles in these other organizations provide him with
the background to oversee our compensation program and to use
the compensation program to effectively motivate and incentivize
our executive officers and other employees.
Mr. Pilenko has worked in executive management positions
across the globe throughout his career. He has been the chairman
and chief executive officer of two companies and currently
serves in this role at Technip. Mr. Pilenkos
international management experience provides our board and the
compensation committee with important insight from a broader
global perspective. Mr. Parker is the final member of our
compensation committee and, as described above, has significant
experience as a director and committee member of publicly traded
companies.
Mr. Amonett, who was appointed as chair of our nominating
and governance committee in June 2010, has served as chief
executive officer of Champion Technologies, Inc. for the past
eleven years. In addition, he was the chairman of TODCO for over
two years prior to it being acquired by Hercules in 2007 and was
the chief executive officer of Weatherford Enterra Inc. from
1996-1997.
He also is a director of two other publicly traded companies,
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serving on the audit committee of both of these companies and on
the compensation committee of one of these companies.
Mr. Webster has a long career in our industry, having
founded and served as the chairman and chief executive officer
of one of TODCOs predecessor entities. He also co-founded
a private equity investment firm and serves as a director of
four other public companies, including some in our industry.
Mr. Websters experience provides our board specific
expertise about our drilling rigs and industry, as well as
valuable insight into the capital markets.
As a whole, the structure of our board lends knowledge specific
to our industry and to our assets, and is composed of directors
that provide a wealth of experience both from a management and
director, as well as a customer and an investor, perspective. In
addition, our board members provide a balance of individual
expertise in the financial, legal, operational, accounting and
marketing functions. Our committees are structured to take
advantage of the diverse individual experiences of their
respective members in order to accomplish the purposes of each
committee.
The nominating and governance committee reviewed the composition
of the board and each of the committees at its meeting in the
fourth quarter of 2010 and determined not to make any changes to
the composition of any of the committees for 2011. As noted
above, Mr. Madonna and Mr. Amonett, at the
recommendation of the nominating governance committee, were
appointed as chairman of the audit committee and nominating and
governance committee, respectively, in June 2010.
Boards
Role in Risk Oversight
Our board, primarily through our committees, plays an important
role in assessing and overseeing the various risks to which the
company is exposed. On an annual basis, our chief compliance
officer makes a comprehensive presentation to the nominating and
governance committee regarding the governance and compliance
risks that are impacting or that could potentially impact our
business. Included in this presentation is an overview and
analysis of our Foreign Corrupt Practices Act (FCPA)
compliance program, a review of our insurance policies, and a
discussion of enforcement trends relevant to our company. In
addition to this annual update, our chief compliance officer
also provides updates on compliance matters relevant to the
company during the executive session held at the end of each
nominating and governance committee meeting, and our management
also provides periodic updates throughout the year as issues
arise. Furthermore, the nominating and governance committee
evaluates the board leadership and overall composition of the
board.
Our audit committee, with input from our internal audit group
and our finance and accounting personnel, oversees our financial
reporting and Sarbanes-Oxley compliance processes. Additionally,
the committee monitors compliance in the human resources area
through the internal audit groups activities. The
committee also meets periodically with management to discuss our
major financial risk exposures and the steps management has
taken to monitor and control these exposures. In addition, our
chief compliance officer provides updates on compliance matters
relevant to the audit committee during the executive session
held at the end of each audit committee meeting.
Our compensation committee assesses risks associated with the
companys compensation program. As discussed in
Compensation Discussion and Analysis below, the compensation
committee establishes and monitors our compensation program in
order to incentivize and motivate our officers and employees,
while taking into account potential risks associated with such
compensation program.
Our board, with input from management, also assesses and
oversees our operational risks. The board receives detailed
reports on Health, Safety and Environmental (HSE)
issues at each board meeting from senior operations and HSE
managers. In addition, the board receives detailed reports on
operational issues at each board meeting from senior operations
personnel and receives and reviews detailed contract status and
marketing reports at each board meeting from senior marketing
personnel. We have a Vice President of Risk who reports directly
to our General Counsel. These individuals manage and monitor our
claims and litigation and provide periodic reports to the board.
Included in these updates are annual presentations about our
insurance packages and managements discussions with our
underwriters. Given the dynamic nature of the insurance market
in our industry, the board plays an active role in evaluating
the adequacy of our insurance packages in managing our
operational risks.
12
Our board also assesses transactional and capital structure
risks. The board receives periodic updates from management on
our capital structure and compliance with debt covenants.
Additionally, the board considers the risks associated with
merger and acquisition and capital markets transactions that are
contemplated in the execution of the strategy of the company.
Each of the committees communicates directly with our management
team to implement the companys risk management objectives.
At the regularly scheduled committee meetings, management
provides feedback on the achievement of these objectives and
receives input from the respective committees regarding future
actions. Management also keeps the full board apprised of any
significant risks that the company is encountering or expects to
encounter as such risks arise.
The committees report their respective assessments of risks to
the full board of directors. We believe our board and committee
structure, and the communication among the committees and
between the board and our management team, allows the board to
effectively oversee the management of our risks by our officers.
Corporate
Governance
Corporate Governance Guidelines. The board of
directors has established Corporate Governance Guidelines to
assist the board in the exercise of its responsibilities under
applicable law. The guidelines provide a framework for the
governance of our company and the board, covering such matters
as determining director independence; director orientation and
continuing education; director responsibilities; director access
to officers, management and advisors; annual evaluations of the
board; and other corporate governance practices and principles.
The guidelines are available on our website at
www.herculesoffshore.com under the Corporate
Governance section. In addition, the guidelines, as well
as the charters of the audit committee, the compensation
committee and the nominating and governance committee, and our
Code of Business Conduct and Ethics, are available in print to
any investor requesting a copy. Requests should be directed to
our Investor Relations Department.
Code of Business Conduct and Ethics. All of
our directors and employees must act ethically at all times and
in accordance with the policies comprising our Code of Business
Conduct and Ethics. The code is a reaffirmation that we expect
all directors and employees to uphold our standards of honesty,
integrity, ethical behavior and compliance with the law, and to
avoid actual or apparent conflicts of interest between their
personal and professional affairs. Directors and employees are
obligated to promptly report any good faith concerns or problems
or any actual or suspected violations of the code. The code sets
forth the procedures for the confidential and anonymous
reporting of a violation of the code. We prohibit any form of
retaliation against any employee for reporting, in good faith,
suspected violations of the code. The code also sets forth
procedures to receive, retain and treat complaints received
regarding accounting, internal accounting controls or auditing
matters, and to allow for the confidential and anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters. In the event of any change or
waiver, including an implicit waiver, of the code granted by us
to one of our executive officers or directors, we will make
disclosure of such waiver available on our website at
www.herculesoffshore.com. The code is available on
our website at www.herculesoffshore.com, as
described above.
Policy Regarding the Granting of Equity-Based Compensation
Awards. We make equity grants to our employees
and directors in accordance with our Policy Regarding the
Granting of Equity-Based Compensation Awards. This policy
establishes guidelines and procedures for the granting of equity
compensation. The policy is intended to ensure that we comply
with applicable laws and regulations as well as leading
governance practices with respect to the granting of equity
compensation. The policy is available on our website at
www.herculesoffshore.com under the Corporate
Governance section.
Clawback Policy. In February 2009, our board
adopted a clawback policy applicable to our executive officers
and directors. The clawback policy provides that, in the event
that an executive officer or director of ours, while employed by
us, is found to have engaged in fraud or misconduct that
resulted in a material restatement of our financial statements
or caused us to violate in any material respect the United
States securities laws and regulations or the FCPA, we shall
have the right to (i) reimbursement of any bonus or
retainer previously paid to such executive officer or director,
(ii) forfeit or cancel any unvested equity compensation
award and the reimbursement of the fair market value of any
vested equity compensation award, and (iii) reimbursement
of any gains or profits realized from
13
the exercise of stock options or from any other disposition of
securities attributable to an award of equity compensation, in
each case awarded to, paid to or realized by the executive
officer or director, or vested, within the two-year period prior
to such restatement or violation. In addition, the board may
terminate the employment of such executive officer or demand the
resignation of such director and take any other lawful actions
as it deems appropriate to enforce the executive officers
and directors obligations to us.
Hedging Policy. The company has adopted a
hedging policy that allows the company to appropriately manage
its mix of fixed and floating interest rates. The hedging policy
assigns responsibility to the companys treasury department
to manage interest rate risk, recommend hedging structures and
execute on such transactions. The companys Chief Executive
Officer and Chief Financial Officer must approve hedges
recommended by the treasury department, provided that such
hedges are within the general guidelines and targets set forth
in the hedging policy. If the recommended hedge is not within
these general guidelines and targets, it must be presented to
the Audit Committee for approval. The Treasury Department or the
Chief Financial Officer reports on any new interest rate hedges
at the next regularly scheduled Audit Committee meeting
occurring after the hedge is put in place.
Executive Sessions. The independent directors
meet regularly in executive session without management
participation before and, if necessary after, each regular
non-telephonic board meeting. Currently, the director who
presides at these meetings is the Chairman of the Board. If the
Chairman ceases to be independent, then the presiding director
will be chosen by a vote of the independent directors.
Communication with the Independent
Directors. Stockholders and other interested
parties may make their concerns known confidentially to the
independent directors by submitting a communication in an
envelope marked Confidential addressed to the
Board of Directors, a specifically named independent
director or the Independent Directors as a group, in
care of our corporate secretary. All such communications will be
conveyed, as applicable, to the full board of directors, the
specified independent director or the independent directors as a
group.
EXECUTIVE
OFFICERS
We have presented below information about our executive officers
as of March 14, 2011. Officers are appointed annually by
the board of directors and serve until their successors are
chosen or until their resignation or removal.
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Nane
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Age
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Position
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John T. Rynd
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53
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Chief Executive Officer and President (1)
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James W. Noe
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Senior Vice President, General Counsel, and Chief Compliance
Officer; Chief Executive Officer and President of Delta Towing
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Stephen M. Butz
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39
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Senior Vice President, Chief Financial Officer and Treasurer (2)
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Terrell L. Carr
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56
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Vice President, Worldwide Operations (Drilling)
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Troy L. Carson
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35
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Chief Accounting Officer
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Todd A. Pellegrin
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Vice President, Worldwide Liftboat Operations
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Don P. Rodney
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President of Hercules International Holdings, Ltd. and Hercules
Oilfield Services Ltd.
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Lisa W. Rodriguez
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50
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Vice President, Human Resources (3)
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(1) |
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For biographical information on Mr. Rynd, see
Election of Directors Board of Directors
beginning on page 3. |
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(2) |
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Stephen M. Butz was appointed Senior Vice President, Chief
Financial Officer and Treasurer in May 2010, after serving as
Vice President, Finance and Treasurer of Hercules Offshore since
October 2006. |
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(3) |
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Lisa W. Rodriguez was appointed Vice President, Human
Resources in May 2010 after previously serving as Senior Vice
President and Chief Financial Officer from March 2007 to May
2010. |
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James W. Noe has served as Senior Vice President, General
Counsel and Chief Compliance Officer since April 2007 (and as
Secretary until February 2010) and as Chief Executive
Officer and President of our Delta Towing division since
December 2008. From October 2005 to April 2007, Mr. Noe
served as Vice President, General Counsel, Chief Compliance
Officer and Secretary of Hercules Offshore. From July 2002 to
October 2005, Mr. Noe was Corporate Counsel for BJ Services
Company, a worldwide oilfield services company. He was in
private legal practice from October 1997 to July 2002.
Stephen M. Butz was appointed Senior Vice President,
Chief Financial Officer and Treasurer in May 2010, after serving
as Vice President, Finance and Treasurer of Hercules Offshore
since October 2006. He joined the company in February 2005 as
the Director of Corporate Development. During 2004,
Mr. Butz served as a consultant to Noble Corporation. From
1996-2004,
he worked in the investment banking industry as an equity
research analyst at Deutsche Bank and Jefferies &
Company. Before joining Jefferies & Company,
Mr. Butz held positions in corporate lending.
Terrell L. Carr joined Hercules Drilling Company, LLC as
Vice President of Operations in January 2007. He is now Hercules
Offshores Vice President of Worldwide Operations
(Drilling) and is responsible for Hercules Offshores
day-to-day
drilling operations. From 2006 to January 2007, Mr. Carr
served as Manager, Operations for the Asia Pacific Region of
ENSCO International Incorporated and from
2001-2006,
he served as a Rig Manager and Country Manager in various
international locations for Ensco International Incorporated.
Prior to joining ENSCO, from 1982 to 2001, Mr. Carr was
employed by Reading & Bates Corporation (later
R&B Falcon Corporation) in various key international
operations and marketing roles.
Troy L. Carson was named Chief Accounting Officer in May
2010. He joined the Company in March 2007 as Vice President and
Corporate Controller and was appointed Principal Accounting
Officer in July 2008. Previously, Mr. Carson served in a
variety of roles, including as the Assistant Corporate
Controller, at Weatherford International Ltd., an international
oilfield services company, from June 2002 to March 2007. In
addition, he was a member of the Commercial Assurance Practice
of Arthur Andersen LLP from 1997 to 2002.
Todd A. Pellegrin was appointed Vice President of
Worldwide Liftboat Operations in December 2008. From June 2008
to December 2008, Mr. Pellegrin served as Vice President of
International Liftboats. From July 2007 to June 2008,
Mr. Pellegrin served as the Managing Director for the West
Africa Region. Prior to this appointment, Mr. Pellegrin
held the position of Managing Director of Hercules Offshore
Nigeria from March 2006 to July 2007. Mr. Pellegrin was the
Managing Director of Danos & Curole Nigeria, Ltd. from
January 2004 to February 2006. From August 1998 to December
2003, he served in several capacities for Danos &
Curole, including International Business Development
Representative.
Don P. Rodney has served as President of Hercules
International Holdings Ltd. since December 2005 and President of
Hercules Oilfield Services Ltd. since September 2006. From July
2004 to December 2005, Mr. Rodney served as Vice President,
Finance of Hercules Drilling Company, LLC. From October 2003 to
June 2004, Mr. Rodney was Chief Financial Officer of
Hercules Offshore Corporation, which is not related to our
company. From November 2002 to July 2003, he was Treasurer of
TODCO, a contract drilling company. Mr. Rodney was
Controller, Inland Water Division of Transocean from February
2001 until October 2002. From November 1992 until January 2001,
Mr. Rodney served as Vice President, Finance for R&B
Falcon Drilling USA, Inc., a marine contract drilling company,
and its predecessors.
Lisa W. Rodriguez was appointed Vice President, Human
Resources in May 2010 after serving as Senior Vice President and
Chief Financial Officer from March 2007 to May 2010.
Ms. Rodriguez served as Chief Financial Officer on an
interim basis from January 2007 to March 2007. Prior to joining
Hercules Offshore, Ms. Rodriguez was Senior Vice President
and Chief Financial Officer of Weatherford International Ltd.
from June 2002 to November 2006.
SECURITY
OWNERSHIP
The following table sets forth information as of March 14,
2011 with respect to the beneficial ownership of our common
stock by (1) each stockholder who is known to us to be a
beneficial owner of more than 5% of our common stock,
(2) our directors and director nominees and the persons
named in the Summary Compensation Table below,
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and (3) all current executive officers and directors as a
group. To our knowledge, except as indicated in the footnotes to
this table or as provided by applicable community property laws,
the persons named in the table have sole investment and voting
power with respect to the shares of common stock indicated.
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Name and Address of Beneficial Owner(1)
|
|
Number of Shares(2)
|
|
|
Percent of Class
|
|
|
BlackRock, Inc.(3)
|
|
|
7,152,418
|
|
|
|
6.1
|
%
|
The Vanguard Group, Inc.(4)
|
|
|
5,953,161
|
|
|
|
5.1
|
%
|
John T. Rynd
|
|
|
904,128
|
|
|
|
|
*
|
Stephen M. Butz
|
|
|
159,397
|
|
|
|
|
*
|
James W. Noe
|
|
|
316,265
|
|
|
|
|
*
|
Terrell L. Carr
|
|
|
274,613
|
|
|
|
|
*
|
Troy L. Carson
|
|
|
106,170
|
|
|
|
|
*
|
Thomas N. Amonett
|
|
|
46,926
|
|
|
|
|
*
|
Suzanne V. Baer
|
|
|
38,771
|
|
|
|
|
*
|
Thomas R. Bates, Jr.(5)
|
|
|
50,000
|
|
|
|
|
*
|
Thomas M Hamilton
|
|
|
44,734
|
|
|
|
|
*
|
Thomas J. Madonna
|
|
|
63,200
|
|
|
|
|
*
|
F. Garner Parker(6)
|
|
|
46,200
|
|
|
|
|
*
|
Thierry Pilenko
|
|
|
31,866
|
|
|
|
|
*
|
Steven A. Webster(7)
|
|
|
1,811,639
|
|
|
|
1.5
|
%
|
Lisa W. Rodriguez(8)
|
|
|
425,573
|
|
|
|
|
*
|
All current executive officers and directors as a group
(16 persons)
|
|
|
4,504,400
|
|
|
|
3.8
|
%
|
|
|
|
* |
|
Less than 1% of issued and outstanding shares of our common
stock. |
|
|
|
(1) |
|
The address of each director and executive officer is 9 Greenway
Plaza, Suite 2200, Houston, Texas 77046. |
|
(2) |
|
The number of shares beneficially owned by the directors and
executive officers includes shares that may be acquired within
60 days of March 14, 2011 by exercise of stock options
is as follows: Mr. Rynd 561,333 shares;
Mr. Butz 98,567 shares;
Mr. Noe 235,250 shares;
Mr. Amonett 17,308 shares;
Mr. Hamilton 17,308 shares;
Mr. Carr 171,667 shares;
Mr. Carson 76,767 shares;
Ms. Baer 10,000 shares;
Mr. Bates 0 shares;
Mr. Madonna 10,000 shares;
Mr. Parker 10,000 shares;
Mr. Pilenko 10,000 shares;
Mr. Webster 10,000 shares;
Ms. Rodriguez 261,667 shares and all
current executive officers and directors as a group
1,651,020 shares. |
|
(3) |
|
Based on a Schedule 13G/A filed February 4, 2011 with
the SEC by BlackRock, Inc., BlackRock, Inc. reported sole voting
and dispositive power with respect to 7,152,418 shares of
common stock. The address for this entity is 40 East 52nd
Street, New York, New York 10022. |
|
(4) |
|
Based on a Schedule 13G filed February 10, 2011 with
the SEC by The Vanguard Group, Inc., The Vanguard Group, Inc.
reported sole voting and dispositive power with respect to
5,752,360 shares of common stock, and Vanguard Fiduciary
Trusty Company, a wholly-owned subsidiary of The Vanguard Group,
Inc., reported sole voting and shared dispositive power with
respect to 200,801 shares of common stock. Fidelity carries
out the voting of the shares under written guidelines
established by the Funds Board of Trustees. The address of
each is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
|
(5) |
|
Pursuant to the partnership agreement of Lime Rock Management LP
(Lime Rock Management), Mr. Bates is obligated
to transfer any proceeds received upon sale of the options to
Lime Rock management and thus the pecuniary interest in the
options is held by Lime Rock Management. Mr. Bates
disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein. |
|
(6) |
|
Mr. Parker owns 7,000 shares indirectly through his
wife. |
|
(7) |
|
Mr. Webster directly owns 1,123,125 shares of our
common stock and is the beneficial owner of 588,767 shares
of our common stock through Kestrel Capital, LP, over which
Mr. Webster shares voting and investment power,
44,747 shares of our common stock as Trustee of the Steven
A. Webster Defined Benefit Pension Plan, 5,000 shares of
our common stock as Trustee of the Elizabeth Anne Webster Trust,
and 40,000 shares of our common stock through
San Felipe Resources Company, of which he and his wife are
the general partners. |
16
|
|
|
(8) |
|
Ms. Rodriguez resigned as Senior Vice President and Chief
Financial Officer in May 2010 and was appointed Vice President,
Human Resources. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires our executive officers and directors and beneficial
owners of more than ten percent (10%) of any class of equity
securities to file initial reports of ownership and reports of
changes in ownership of our common stock with the SEC and,
pursuant to rules promulgated under Section 16(a), such
individuals are required to furnish us with copies of
Section 16(a) reports they file. Based solely on a review
of the copies of such reports furnished to us during the year
ended December 31, 2010 and written representations from
our officers and directors, all Section 16(a) reports
applicable to our officers and directors and any beneficial
owners of ten percent (10%) or more of a class of equity
securities were filed on a timely basis.
COMPENSATION
DISCUSSION AND ANALYSIS
Overview
of Previous Year Performance and Compensation
Two thousand and ten was a critical year in the history of
Hercules Offshore. While the global economic downturn that began
late in 2008 continued to impact the industry, we were further
effected in 2010 by the new regulations for offshore drilling
that were imposed in the wake of the Macondo well incident.
These regulations resulted in our customers experiencing
significant delays in obtaining necessary permits to operate in
the U.S. Gulf of Mexico. As a leading provider of shallow
water drilling and marine services in the Gulf of Mexico, these
events have significantly impacted our operations, causing our
profitability and stock price to trail that of others in the
broader oilfield services industry in 2010.
While our ability to secure new business in the Gulf of Mexico
has been hindered by these factors, the company met nearly all
of our 2010 financial and non-financial goals. We continued to
demonstrate exceptional operational performance in 2010, and
have recently taken several important steps to position our
company for success in the future as noted below:
2010 Operational Successes:
|
|
|
|
|
Improved drilling safety performance, as measured by the
industry metric of total recordable incident rate, by eight
percent in 2010 as compared to 2009. We have achieved continuous
year over year improvement since the formation of our company,
and in 2010 had a company-wide total recordable incident rate
lower than the industry average in comparable markets.
|
|
|
|
Increased utilization in both drilling and liftboat divisions
during 2010 as compared to 2009, including improved utilization
of our marketed domestic jackup rigs from 59% to 81%.
|
|
|
|
Proactively reduced operating expenditures in the Domestic
Offshore and Inland operations, which resulted in
$45 million lower operating costs in 2010 as compared to
2009.
|
2011 Strategic Initiatives:
|
|
|
|
|
In January 2011, the company invested in approximately eight
percent of a new entity, Discovery Offshore S.A., which
investment was used by Discovery Offshore towards funding down
payments on two newbuild ultra high specification jackup
drilling rigs. The company also executed a construction
management agreement and a services agreement with respect to
each of the rigs.
|
|
|
|
In January 2011, the company entered into an agreement with
China Oilfield Services Limited whereby it will market and
operate a jackup drilling rig for a specified opportunity in
Angola.
|
|
|
|
In February 2011, the company entered into an asset purchase
agreement with Seahawk Drilling, Inc., whereby the company would
purchase 20 jackup rigs and related assets, accounts receivable,
cash and certain liabilities. Seahawk filed voluntary
Chapter 11 petitions before the U.S. Bankruptcy Court,
and the transaction is subject to bankruptcy approval and other
regulatory and customary approvals.
|
17
|
|
|
|
|
In March 2011, the company amended its credit agreement to allow
for the Seahawk transaction, to increase its investment basket
and to revise the financial covenants.
|
Hercules Offshores stock price has performed well during
2011 to-date as we have announced these transactions, with the
stock price increasing from $3.48 per share on December 31,
2010 to a closing price of $5.87 on March 14, 2011, a 69%
improvement.
2010
Compensation Actions
Irrespective of our continued financial and strategic
improvements, the impact of the economic downturn and the
Macondo well incident created significant challenges to retain
the management team. With our depressed stock price, the company
has been unable to offer competitive long-term grant levels, as
doing so would significantly dilute our shareholders. In 2010,
long-term grants were 56% below the median of our peers on
average for the named executive officers, and in 2009, long-term
incentive grant values were 87% below the median. It is also
worth noting that certain members of the executive team
voluntarily took a 10% reduction in base salary in 2009, which
remains in effect.
The Board of Directors and its Compensation Committee (the
committee) remain committed to retaining the
existing management team, and as a result, have offered cash
retention incentives to recover some of the shortfall in
long-term incentive compensation levels. While a portion of the
awards are delivered solely upon continued employment, the
majority of such awards are earned only if the company achieves
specific performance goals during the year. This Incentive
and Retention Plan was implemented in 2010, and covers
both the 2010 and 2011 fiscal years. The committee believes that
the implementation of this plan has been critical in deflecting
efforts by competitors that can offer attractive compensation
opportunities, and in keeping the management team focused on
executing the current business strategy for future shareholder
value creation.
With the implementation of the plan, 2010 target total direct
compensation was still 10% below the median overall for the
named executive officers. It is important to note that the
committee utilized this special arrangement to retain management
during a difficult time for the company, but has no intention of
continuing the program beyond 2011.
For 2010, compensation for the named executive officers
increased over 2009 levels primarily due to the achievement of
our performance goals under the annual incentive plan and under
the Incentive and Retention Plan. A discussion of our
performance versus the goals in each plan is described in detail
below. Also impacting 2010 compensation for named executive
officers, other than Mr. Rynd and Ms. Rodriguez, is a
one time retention payment under the 2009 Retention Plan which
was paid in the first quarter of 2010 and is therefore included
in the 2010 compensation. Equity incentives in the form of stock
options were also higher in 2010 versus 2009; however, the grant
values were again well below median market levels, as indicated
previously.
Aside from those mentioned previously, the companys most
important approaches to compensation did not change in 2010,
including an equity ownership requirement for officers and a
clawback policy. The committee also continues to rely on the
advice of independent consultants hired directly by the
committee.
2011
Pay-For-Performance
Recognizing that it had to take special actions in 2010, the
committee has strengthened the link between
pay-for-performance
for 2011 in two ways. First, the committee has implemented a
long-term equity incentive program whereby 56% of the target
award level of shares granted to the named executive officers is
tied to the achievement of EBITDA and Safety goals. The specific
goals and performance compared to these goals will be disclosed
in our annual proxy statement filed in 2012. Additionally in
2011, the committee established a separate cash-based long-term
incentive program tied to total shareholder return for the Chief
Executive Officer, where 50% of the award is earned only upon
the achievement of stock price hurdles ranging from $5 to $10
per share.
The following compensation discussion and analysis outlines the
processes, elements and decisions regarding 2010 compensation
for our executive officers named in the Summary Compensation
Table, who are referred to as the named executive officers.
18
Executive
Compensation Decision Making Process
Compensation
Committee
The board of directors delegates to the compensation committee
responsibility for establishing compensation of its executive
officers, pursuant to a written charter adopted by the board and
posted on the companys website at
www.herculesoffshore.com. Each of the three members of
the compensation committee meets the independence requirements
contained in the NASDAQ listing standards.
The compensation committee is responsible for the oversight and
administration of the companys base, annual incentive,
long-term compensation and benefit programs for executive
officers. The committees key compensation responsibilities
are:
|
|
|
|
|
to monitor the elements of compensation relevant to the Chief
Executive Officer and executive officers to determine whether
such programs are properly achieving their intended purposes of
aligning executive compensation and company performance, and do
not contain provisions or by their nature promote adverse risks
or risk taking that could be detrimental in their operation to
the company or its shareholders;
|
|
|
|
to establish corporate goals and objectives relevant to the
incentive compensation of executive officers;
|
|
|
|
to consider and take action on the adoption of and changes to
our incentive compensation plans, equity-based compensation
plans and other benefit plans;
|
|
|
|
to administer our compensation plans that it is assigned
responsibility to administer;
|
|
|
|
to review and approve any equity-based plans and awards that are
not subject to stockholder approval;
|
|
|
|
to approve employment, severance,
change-of-control
and retention agreements, and amendments for executive officers;
|
|
|
|
to make recommendations to the board of directors regarding the
adoption or modification of any stock ownership guidelines
applicable to executive officers and directors;
|
|
|
|
to appraise the performance of, and to provide feedback to, the
Chief Executive Officer; and
|
|
|
|
to develop and make recommendations to the board regarding
succession plans for our Chief Executive Officer and to review,
based on the recommendations of the Chief Executive Officer, the
succession plans for other key executive officers and members of
management.
|
Role
of Consultants
To assist it in structuring our compensation program in 2010,
the committee engaged Frederic W. Cook & Co., Inc.
(F.W. Cook), an outside executive compensation
consulting firm, to conduct an annual review of our total
compensation program for our key employees, including the named
executive officers. F.W. Cook provided the committee with
relevant market data and alternatives to consider when making
decisions with respect to the Chief Executive Officers
compensation and his recommendations with respect to the
compensation of the other named executive officers. Our
management did not engage F.W. Cook in any other capacity for
2010 and does not direct or oversee the retention or activities
of F.W. Cook with respect to our executive compensation program.
The committee has retained the services of F.W. Cook for 2011.
Role
of Executive Officers
On an annual basis, our Chief Executive Officer and President
reviews the performance of each of the other named executive
officers and, based on this review, makes recommendations to the
committee with respect to the compensation of the named
executive officers, other than himself. The Chief Executive
Officer and President also considers internal pay equity issues,
individual performance and company performance in making his
recommendations to the committee. The Vice President, Human
Resources provides general administrative support for the
committee, such as providing advice to the committee and
overseeing the documentation of equity plans and awards as
approved by the committee.
19
Compensation
Philosophy and Objectives
The Companys continued success depends on attracting,
directing, motivating, and retaining top talent, including an
exceptional senior management team that can lead a dynamic
international company. The committee believes that executive
compensation programs play an important role in achieving these
goals. Its programs are therefore designed:
|
|
|
|
|
to attract, retain, motivate, and reward executive officers who
are capable of leading the Company in a complex, competitive,
and changing industry;
|
|
|
|
to align the interests of our executive officers with those of
our stockholders;
|
|
|
|
to pay for performance;
|
|
|
|
to ensure that performance-based compensation does not encourage
excessive risk taking; and
|
|
|
|
to increase retention by requiring forfeiture of a substantial
portion of an executive officers compensation upon
voluntary termination of employment.
|
Use of
Data
In making compensation decisions, the committee compares each
element of total compensation against a peer group of publicly
traded offshore drilling and oilfield service companies. The
committee periodically reviews and adjusts the composition of
the peer group. During 2010, with F.W. Cooks assistance
and input from senior management, the committee reviewed our
peer group and determined that the current composition was
appropriate. The current peer group consists of companies
against which the committee believes we compete for talent,
business and stockholder investment. The companies that the
committee selected to comprise our peer group were:
|
|
|
|
|
Atwood Oceanics, Inc.
|
|
Helmerich & Payne, Inc
|
|
Oil States International, Inc.
|
Seahawk Drilling
|
|
Key Energy Services
|
|
Parker Drilling Company
|
Oceaneering International,Inc.
Basic Energy Services
|
|
Patterson-UTI Energy, Inc.
Unit Corporation
|
|
Superior Energy Services, Inc.
Rowan Companies, Inc.
|
Complete Production Services, Inc.
|
|
Global Industries
|
|
|
Use of
Judgment
The committee believes that the application of its members
and the consultants collective experiences and judgment is
as important to excellence in compensation as the use of data.
The market data is an important tool for analysis and
decision-making; however, the committee exercises both positive
and negative discretion based on their experiences and judgment.
The committee gives consideration to each officers
personal contributions to the organization, as well as his or
her skill sets, qualifications and individual performance, and
competitive conditions in determining compensation in an effort
to retain highly qualified employees in key positions. The
committee recognizes that certain executive officers may have a
more expansive role in executing the management of our company
compared to similarly situated executives in the peer group. The
committee also seeks to reward the sense of urgency and the
ingenuity that allows the officer to effectively resolve
challenges and capitalize on opportunities to the benefit of the
company.
Key
Compensation Elements
The committee believes the compensation packages we provide to
our executives, including the named executive officers, should
include base salary, short-term incentive compensation that
rewards performance as measured against established goals, and
longer-term incentive compensation. The committee believes the
form of compensation should include both cash and stock-based
compensation. For 2010, the principal components of compensation
for named executive officers were:
|
|
|
|
|
Base salary;
|
|
|
|
Short-term and long-term incentive and retention compensation;
|
20
|
|
|
|
|
Long-term equity-based awards; and
|
|
|
|
Benefits.
|
In making compensation decisions, the committee compares each
element of total compensation to peer data and consultant
provided-survey data, combined with its judgment and philosophy.
The committee targets total direct compensation for named
executive officers, which includes base salary, cash retention
awards, short-term and long-term cash incentives and long-term
equity incentives, valued at the grant date, at the median of
total compensation paid to similarly situated executive officers
within the peer group. Variations may occur due to an individual
executive officers scope of responsibility and performance.
A significant percentage of total compensation is allocated to
short-term and long-term incentives and therefore is at risk.
Income from such incentive compensation programs is primarily
realized as a result of the performance of our company and the
individual, depending on the type of award, compared to
established goals. There is no pre-established policy or target
for the allocation between either cash and noncash or short-term
and long-term incentive compensation.
The committee targets total direct compensation at the 50th
percentile of the latest available compensation data. For 2010,
total direct compensation was at or below the median for all of
our named executive officers for whom we have comparable data
available among our peer group, with the exception of
Ms. Rodriguez, whose total direct compensation was between
the median and the 75th percentile, primarily due to her partial
year of service as Senior Vice President and Chief Financial
Officer, and Mr. Carr, whose total direct compensation was
also between the median and the 75th percentile.
The following is a discussion of each compensation element and
the actions taken by the committee in 2010.
Base
Salary
The committee believes base salary is a critical element of
executive compensation because it provides executives with a
base level of monthly income. The committee determines the base
salary of each named executive officer based on his or her
position and responsibility. During its review of base salaries
for executives, the committee primarily considers:
|
|
|
|
|
Individual performance of the executive, including leadership
and execution of strategic initiatives and the accomplishment of
goals established for each of them;
|
|
|
|
Market data provided by our outside compensation consultant;
|
|
|
|
The executives total compensation, both individually and
relative to other officers; and
|
|
|
|
For named executive officers other than the Chief Executive
Officer, the recommendations of the Chief Executive Officer.
|
The committee typically considers base salary levels annually as
part of its review of the performance of our named executive
officers and from time to time upon a promotion or other change
in job responsibilities.
In May 2010, Ms. Rodriguez resigned as our Senior Vice
President and Chief Financial Officer and became Vice President,
Human Resources. Mr. Butz was named our Senior Vice
President, Chief Financial Officer and Treasurer in May 2010
after serving as our Vice President, Finance and Treasurer, and
Mr. Carson was named our Chief Accounting Officer after
serving as our Vice President and Corporate Controller. The
following table notes the salary adjustments reflecting the
change in these named executive officers positions:
|
|
|
|
|
|
|
|
|
Name
|
|
From
|
|
|
To
|
|
|
Stephen M. Butz
|
|
$
|
235,000
|
|
|
$
|
300,000
|
|
Troy L. Carson
|
|
$
|
225,000
|
|
|
$
|
250,000
|
|
Lisa W. Rodriguez
|
|
$
|
360,000
|
|
|
$
|
235,000
|
|
The committee reviewed the base salaries of our named executive
officers in the first quarter of 2011 and decided, given the
current economic environment and performance of the company, to
maintain the salaries at their current levels without any
increase.
21
Short-term
and Long-term Incentive and Retention Compensation
2009
Retention Program
In February 2009, in light of the impact of the global economic
downturn on the companys financial condition, the
committee, with the assistance of F.W. Cook, reviewed the
long-term retention programs for named executive officers. Based
on that review, the committee established a cash-based program
to retain key personnel. The objective of the plan was to retain
key officers and other critical employees to successfully manage
the company through the economic challenges and financial
uncertainty faced by the company as a result of the global
economic and drilling industry downturn. The following table
sets forth the retention bonus that each of our named executive
officers was eligible to receive, and was paid, on March 1,
2010.
|
|
|
|
|
Name
|
|
Retention
|
|
|
John T. Rynd
|
|
$
|
|
|
Stephen M. Butz
|
|
$
|
117,500
|
|
James W. Noe
|
|
$
|
187,500
|
|
Terrell L. Carr
|
|
$
|
152,500
|
|
Troy L. Carson
|
|
$
|
112,500
|
|
Lisa W. Rodriguez
|
|
$
|
|
|
HERO
Plan
The Hercules Offshore Incentive Compensation Program, referred
to in this proxy statement as the HERO Plan, is an
annual cash incentive program the committee approved for use
beginning in 2006. The HERO Plan provides guidelines for the
calculation of annual non-equity incentive-based compensation,
subject to committee oversight. The committee, in its
discretion, from time to time may modify certain elements of the
guidelines in order to account for special events, such as
acquisitions made by the company, or to more closely align the
guidelines with the strategic objectives of the company. At the
end of 2009, the committee established a target range of
eligibility for potential payouts for the named executive
officers. The various incentive levels are based on competitive
information and the participants responsibility for and
impact on our results, with threshold, target and maximum award
opportunities established as a percentage of base salary.
In December 2009, the committee determined the components of the
HERO Plan for 2010. Depending upon the role of the participant
in the company, the components included earnings from operations
adding back depreciation (EBITDA) as adjusted, days
sales outstanding and days payable outstanding, divisional
EBITDA as adjusted, maintenance capital expenditures, safety
goals, and personal goals. The committee set annual performance
objectives for the safety and personal goals components. For all
other components, which are financial in nature, the committee
set objectives for the six months ended June 30, 2010.
Mid-year the committee established the objectives for the
financial components for the six months ended December 31,
2010.
Certain components of the objectives have threshold, target and
maximum, or stretch, objectives. The named executive officers
participating in the HERO Plan receive payment of a percentage
of his or her salary based on the achievement of the objectives.
Each component is weighted with the total potential threshold,
target and maximum award opportunities as a percent of the
average salary for the named executive officers set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HERO Incentive Levels for 2010
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
Name
|
|
(%)
|
|
|
(%)
|
|
|
(%)
|
|
|
John T. Rynd
|
|
|
50
|
%
|
|
|
100
|
%
|
|
|
200
|
%
|
Stephen M. Butz(1)
|
|
|
30
|
%
|
|
|
60
|
%
|
|
|
120
|
%
|
James W. Noe
|
|
|
30
|
%
|
|
|
60
|
%
|
|
|
120
|
%
|
Terrell L. Carr
|
|
|
30
|
%
|
|
|
60
|
%
|
|
|
120
|
%
|
Troy L. Carson
|
|
|
20
|
%
|
|
|
40
|
%
|
|
|
80
|
%
|
Lisa W. Rodriguez(1)
|
|
|
20
|
%
|
|
|
40
|
%
|
|
|
80
|
%
|
22
|
|
|
(1) |
|
The percent of salary award opportunity for Mr. Butz and
Ms. Rodriguez is applied to the average annual base salary
earned during 2010, which is a weighted average of the salaries
which they earned in their respective roles throughout 2010. |
For 2010, the named executive officers HERO Plan awards,
excluding Mr. Carr, were based upon achievement of
corporate objectives relating to Consolidated EBITDA, Days Sales
Outstanding, Days Payable Outstanding and personal goals, with
the components accounting for 30%, 20%, 10% and 40%,
respectively. The 2010 HERO Plan award for Mr. Carr was
based upon achievement of Consolidated EBITDA, drilling
division EBITDA, maintenance capital expenditures, safety
goals, and personal goals, with these components accounting for
5%, 40%, 25%, 15% and 15%, respectively.
The payout guidelines are as follows:
There is no payment for Consolidated EBITDA, drilling
division EBITDA, Days Sales Outstanding and Days Payable
Outstanding objectives (the Financial Objectives) of
the HERO Plan award unless we achieve the threshold performance
levels;
If for each of the Financial Objectives of the HERO Plan award
we exceed the threshold performance level but do not achieve the
target performance level, the award opportunity for such
Financial Objective is prorated between the threshold and target
award opportunity;
If for each of the Financial Objectives of the HERO Plan award
we exceed the target performance level but do not achieve the
stretch performance level, the award opportunity for such
Financial Objective is prorated between the target and stretch
award opportunity;
If for each of the Financial Objectives of the HERO Plan award
we exceed the stretch target performance level, the award
opportunity for such Financial Objective is the stretch award
opportunity;
There is no payment for the safety objective component of the
HERO Plan award unless the objective is achieved;
Payment for the safety objective component is at the target
level if only the safety objective component is achieved (even
if the EBITDA objective is not achieved); however, payment is at
the same level as the drilling division EBITDA objective
component if the safety objective is achieved and we achieve or
exceed target for the drilling division EBITDA objective
component;
If the maintenance capital expenditures objective is achieved,
the component is paid at the same level as the drilling
division EBITDA component. If the drilling
division EBITDA objective component is below threshold and
the maintenance capital expenditure objective is achieved, it is
paid at one half of the threshold level; and
If personal goals are achieved, payment is at the target level.
Upon completion of the fiscal year, the committee assesses
performance for each objective of the HERO Plan comparing the
actual results to the predetermined threshold, target and
stretch levels for each objective, and a payment for each
objective is calculated.
23
The following table shows the performance objectives, other than
the safety goal and personal goals, and the actual 2010 results:
2010
Performance Objectives and Results
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Objective
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Stretch
|
|
|
Weight
|
|
|
Actual
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
Six Months ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
45.4
|
|
|
$
|
52.2
|
|
|
$
|
59.0
|
|
|
|
30
|
%
|
|
$
|
72.7
|
|
Days Sales Outstanding
|
|
|
100
|
|
|
|
95
|
|
|
|
90
|
|
|
|
20
|
%
|
|
|
81
|
|
Days Payable Outstanding
|
|
|
55
|
|
|
|
60
|
|
|
|
65
|
|
|
|
10
|
%
|
|
|
40
|
|
Six Months ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
80.3
|
|
|
$
|
92.3
|
|
|
$
|
104.4
|
|
|
|
30
|
%
|
|
$
|
98.5
|
(a)
|
Days Sales Outstanding
|
|
|
81
|
|
|
|
78
|
|
|
|
75
|
|
|
|
20
|
%
|
|
|
80
|
|
Days Payable Outstanding
|
|
|
42
|
|
|
|
45
|
|
|
|
48
|
|
|
|
10
|
%
|
|
|
44
|
|
|
|
|
(a) |
|
Excludes a $125.1 million impairment of property and
equipment. |
Drilling:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Objective
|
|
|
|
|
|
|
|
|
|
Threshold
|
|
|
Target
|
|
|
Stretch
|
|
|
Weight
|
|
|
Actual
|
|
|
|
|
|
|
(Dollars in millions)
|
|
|
|
|
|
Six Months ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
45.4
|
|
|
$
|
52.2
|
|
|
$
|
59.0
|
|
|
|
5
|
%
|
|
$
|
72.7
|
|
Drilling Division EBITDA
|
|
|
33.5
|
|
|
|
38.5
|
|
|
|
43.6
|
|
|
|
40
|
%
|
|
|
59.9
|
|
Maintenance Capital Expenditures
|
|
|
|
|
|
|
17.5
|
|
|
|
|
|
|
|
25
|
%
|
|
|
9.8
|
|
Six Months ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
80.3
|
|
|
$
|
92.3
|
|
|
$
|
104.4
|
|
|
|
5
|
%
|
|
$
|
98.5
|
(a)
|
Drilling Division EBITDA
|
|
|
61.8
|
|
|
|
71.1
|
|
|
|
80.3
|
|
|
|
40
|
%
|
|
|
59.6
|
(b)
|
Maintenance Capital Expenditures
|
|
|
|
|
|
|
21.7
|
|
|
|
|
|
|
|
25
|
%
|
|
|
8.5
|
|
|
|
|
(a) |
|
Excludes a $125.1 million impairment of property and
equipment. |
|
(b) |
|
Excludes a $122.7 million impairment of property and
equipment. |
The safety objective for Mr. Carr was to achieve a ten
percent reduction from the December 31, 2009 drilling
division Total Recordable Incident Rate, which is
calculated as the total number of recordable incidents,
multiplied by 200,000, and then divided by the actual number of
man hours worked (TRIR), as of December 31,
2010. Although as of December 31, 2010, the drilling
division TRIR was lower than the TRIR as of
December 31, 2009, it was not ten percent lower; therefore
the safety component was not paid out for Mr. Carr.
For the personal goals component, each executive set four goals
to accomplish during the year which were approved by the
committee. The goals are strategically aligned with the
companys goals and objectives. Where the goals are not
quantitative, the extent to which the executive (other than the
Chief Executive Officer) accomplishes or exceeds the goals is
determined subjectively by the Chief Executive Officer and
reviewed with the compensation committee, and the extent to
which the Chief Executive Officer accomplishes or exceeds the
goals is determined subjectively by the compensation committee.
These judgments are reflected in the amount of the
executives bonus attributable to this metric.
24
The table below reflects the percentage of the personal goal
component that each named executive officer achieved:
|
|
|
|
|
Name
|
|
% of Personal Goals Achieved
|
|
John T. Rynd
|
|
|
80.0
|
%
|
Stephen M. Butz
|
|
|
80.0
|
%
|
James W. Noe
|
|
|
97.5
|
%
|
Terrell L. Carr
|
|
|
75.0
|
%
|
Troy L. Carson
|
|
|
100.0
|
%
|
Lisa W. Rodriguez
|
|
|
87.5
|
%
|
The named executive officers received the following payments in
March 2011, expressed as a percentage of weighted average base
salary earned in 2010 and in dollars, under the HERO Plan based
on the 2010 performance objectives set forth above.
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
|
|
HERO
|
|
|
|
|
Award
|
|
|
|
|
(% of
|
|
|
|
|
Average
|
|
2010
|
|
|
Base
|
|
HERO
|
Name
|
|
Salary)
|
|
Award
|
|
John T. Rynd
|
|
|
115
|
%
|
|
$
|
721,997
|
|
Stephen M. Butz
|
|
|
69
|
%
|
|
|
190,366
|
|
James W. Noe
|
|
|
73
|
%
|
|
|
246,246
|
|
Terrell L. Carr
|
|
|
53
|
%
|
|
|
145,193
|
|
Troy L. Carson
|
|
|
49
|
%
|
|
|
117,559
|
|
Lisa W. Rodriguez
|
|
|
47
|
%
|
|
|
131,489
|
|
The committee reviewed the potential percent of salary award
opportunity at threshold, target and maximum for all objectives,
other than personal goals which are paid at the target level,
that each of our named executive officers is eligible to receive
in 2012 based on 2011 performance and did not change any of the
percentages from the current year percentages.
2010
Executive Officer Cash Performance Incentive and Retention
Plan
At its meeting in the first quarter of 2010, the compensation
committee approved a cash performance incentive and retention
plan (the Cash Performance Incentive and Retention
Plan) amount payable to each of the named executive
officers. The Cash Performance Incentive and Retention Plan is
based upon a target cash payout (the Target Cash
Payout) for each named executive officer and upon the
achievement of certain objectives to be established by the
compensation committee of the company in each of fiscal years
2010 and 2011. Each of the executive officers is guaranteed to
receive 50% of his or her Target Cash Payout each year and can
receive a maximum of 150% of his or her Target Cash Payout each
year based upon the extent to which the company achieves the
budgeted objectives.
25
The following table shows the performance objectives, and the
actual 2010 results:
2010
Performance Objectives and Results
Corporate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Objective
|
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Stretch
|
|
Weight
|
|
Actual
|
|
|
(Dollars in millions)
|
|
Six Months ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
38.6
|
|
|
$
|
45.4
|
|
|
$
|
52.2
|
|
|
|
43.4
|
%
|
|
$
|
72.7
|
|
Days Sales Outstanding
|
|
|
105
|
|
|
|
100
|
|
|
|
95
|
|
|
|
33.3
|
%
|
|
|
81
|
|
Days Payable Outstanding
|
|
|
50
|
|
|
|
55
|
|
|
|
60
|
|
|
|
23.3
|
%
|
|
|
40
|
|
Six Months ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
68.3
|
|
|
$
|
80.3
|
|
|
$
|
92.3
|
|
|
|
43.4
|
%
|
|
$
|
98.5
|
(a)
|
Days Sales Outstanding
|
|
|
85
|
|
|
|
81
|
|
|
|
78
|
|
|
|
33.3
|
%
|
|
|
80
|
|
Days Payable Outstanding
|
|
|
38
|
|
|
|
42
|
|
|
|
45
|
|
|
|
23.3
|
%
|
|
|
44
|
|
|
|
|
(a) |
|
Excludes a $125.1 million impairment of property and
equipment. |
Drilling:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Objective
|
|
|
|
|
|
|
Threshold
|
|
Target
|
|
Stretch
|
|
Weight
|
|
Actual
|
|
|
(Dollars in millions)
|
|
Six Months ended June 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
38.6
|
|
|
$
|
45.4
|
|
|
$
|
52.2
|
|
|
|
15
|
%
|
|
$
|
72.7
|
|
Drilling Division EBITDA
|
|
|
28.5
|
|
|
|
33.5
|
|
|
|
38.5
|
|
|
|
50
|
%
|
|
|
59.9
|
|
Maintenance Capital Expenditures
|
|
|
|
|
|
|
17.5
|
|
|
|
|
|
|
|
35
|
%
|
|
|
9.8
|
|
Six Months ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated EBITDA
|
|
$
|
68.3
|
|
|
$
|
80.3
|
|
|
$
|
92.3
|
|
|
|
15
|
%
|
|
$
|
98.5
|
(a)
|
Drilling Division EBITDA
|
|
|
52.5
|
|
|
|
61.8
|
|
|
|
71.1
|
|
|
|
50
|
%
|
|
|
59.6
|
(b)
|
Maintenance Capital Expenditures
|
|
|
|
|
|
|
21.7
|
|
|
|
|
|
|
|
35
|
%
|
|
|
8.5
|
|
|
|
|
(a) |
|
Excludes a $125.1 million impairment of property and
equipment. |
|
(b) |
|
Excludes a $122.7 million impairment of property and
equipment. |
The committee revised the 2012 Target Cash Payouts for
Mr. Butz and Ms. Rodriguez in light of their changes
in position. The Target Cash Payouts for the executive officers
for 2010 and 2011 and the actual payout made in the first
quarter of 2011 are set forth in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of
|
|
Target Payout
|
|
Target Payout
|
|
Actual Payout
|
Executive Officer
|
|
Year 1
|
|
Year 2
|
|
Year 1
|
|
John T. Rynd
|
|
$
|
522,400
|
|
|
$
|
783,600
|
|
|
$
|
644,167
|
|
Stephen M. Butz
|
|
$
|
120,000
|
|
|
$
|
216,000
|
|
|
$
|
147,971
|
|
James W. Noe
|
|
$
|
162,000
|
|
|
$
|
243,000
|
|
|
$
|
199,761
|
|
Terrell L. Carr
|
|
$
|
200,000
|
|
|
$
|
300,000
|
|
|
$
|
247,446
|
|
Troy L. Carson
|
|
$
|
120,000
|
|
|
$
|
180,000
|
|
|
$
|
147,971
|
|
Lisa W. Rodriguez
|
|
$
|
232,800
|
|
|
$
|
180,000
|
|
|
$
|
287,064
|
|
CEO
Special Retention Award and Performance Awards
The committee, with assistance from F.W. Cook, reviewed the
total direct compensation of the Chief Executive Officer and
President in the fourth quarter of 2010. The study indicated
that his total direct compensation opportunity was below the
market median for the second year in a row. 2010 target total
direct compensation was
26
26% below the market median, and the 2009 target was 58% below
the median. In light of the market data, and the significant
scope of Mr. Rynds responsibilities and his
successful leadership of the company during the economic
downturn and industry challenges, the committee approved a
special retention award and two performance awards for
Mr. Rynd. The objective of the awards was to retain
Mr. Rynd to develop and execute the strategic goals of the
company, during a time when the company is continuing to face
industry challenges.
The grant date of each of the three awards is January 1,
2011. Of the total potential value of the awards, 50% is subject
to performance-vesting conditions and 50% is subject solely to
time-vesting conditions. Vesting under each award is conditioned
upon Mr. Rynds continuous employment with the Company
from the date of grant until the earlier of a specified vesting
date or a change in control of the Company. Vesting of any award
and the amount payable under any vested award do not affect
vesting or the amount payable under any of the other awards.
Subject to vesting, all awards are payable in cash within thirty
days of vesting. No shares of common stock are issuable under
any of the awards.
The first award is pursuant to a special retention agreement
(the Retention Agreement) by and between the Company
and Mr. Rynd, which provides for a cash payment based on
500,000 shares of Common Stock, subject to vesting. Upon
satisfaction of vesting requirements, 100% of the amount under
the Retention Agreement becomes vested on December 31,
2013. If the requirements necessary for 100% vesting of this
award are not met, no amounts become vested and no amount is
payable. The amount payable in cash under the first award shall
be based on the product of the number of shares of common stock
of the company and the average price of the common stock for the
90 days prior to the date of vesting (the Average
Share Price), but will not exceed $5,000,000.
The second and third awards are performance awards
(Performance Awards) under the existing amended and
restated Hercules Offshore 2004 Long-Term Incentive Plan (the
2004 LTIP). Each Performance Award provides for a
cash payment, subject to vesting, based on 250,000 shares
of the Companys common stock. Upon satisfaction of vesting
requirements, 100% of the first Performance Award becomes vested
on December 31, 2013, and 100% of the second Performance
Award becomes vested on March 31, 2014. Under each
Performance Award, vesting is subject to the further requirement
that the Average Share Price is at least $5.00. Subject to the
satisfaction of the vesting requirements, the payout for each
Performance Award shall be equal to the product of
(1) 250,000, (2) the Average Share Price or $10.00,
whichever is less, divided by $10.00, and (3) the lesser of
the Average Share Price or $10.00. If the requirements necessary
for vesting of a Performance Award are met, the amount payable
in cash under each of the Performance Awards shall be not less
than $625,000 and not more than $2,500,000.
Equity
Based Program
Our 2004 LTIP encourages participants to focus on our long-term
performance and provides an opportunity for executive officers
and certain designated key employees to increase their stake in
our company through grants of restricted common stock and stock
options. For this purpose, the committee valued stock options by
using the Binomial Lattice Option Pricing Model.
The equity grants for the named executive officers are
determined by the committee. The committee uses the market data
on peer groups provided by the consultant and their own judgment
to determine the use of stock options, restricted stock or both.
In 2010, the committee utilized option grants to named executive
officers to emphasize long-term growth and align the performance
of our executive officers with the interests of our shareholders.
The 2004 LTIP was designed prior to our initial public offering
in November 2005 with an initial goal of attracting high-caliber
executives to join a
start-up
company and take it public. Beginning with 2007 awards, the
committee reviewed compensation data prepared by our outside
compensation consultant from published proxies and other
publicly available information related to long-term incentive
levels in place for competitors and members of the peer group of
companies identified by the committee. The committee recognized
that even though various accepted models for valuing long-term
incentive awards must be relied on for making assumptions,
predictions and accounting treatments, restricted stock and
especially stock options have uncertain values both at the time
of award and over the life of the award. Therefore, the
committee recognized there may be years when awards appear to
lead the competition, but there may also be years when the
awards lag relative to the competition. With this variability in
mind, and the fact that we have been public since only November
2005, the committee used its discretion and made subjective
judgments in determining the level of long-term incentive awards
to the named executive officers.
27
In total, we currently have approximately 460 key employees,
including the named executive officers, and nonemployee
directors who have received awards under the 2004 LTIP.
Under the 2004 LTIP, the committee may grant participants stock
options, restricted stock, performance stock awards and other
stock-based awards. In granting these awards, the committee may
establish any conditions or restrictions it deems appropriate
within the limits of the plan. Awards of restricted stock or
stock options issued to our named executive officers to date
under the 2004 LTIP vest within three years after the date of
the grant. Awards to officers subject to Section 16(b) of
the Securities Exchange Act of 1934, including the named
executive officers, require the approval of the committee.
The exercise price of stock options granted prior to 2008 equals
the average of the high and low trading price of our common
stock on the NASDAQ Global Select Market on the date of grant.
For option grants made in 2008 and going forward, the committee
determined that the exercise price of stock options will equal
the closing price of our common stock on the date of grant. This
change was made because it is a more standard method of
determining the exercise price and provides greater transparency
to the determination of the price. The committee reviewed awards
to each named executive officer under the 2004 LTIP in detail
prior to its regularly scheduled meeting in the first quarter of
the past year. On occasion the committee approves awards for
newly hired employees, newly promoted employees, or other key
employees during other times of the year. The committee may also
delegate its authority to approve awards of stock options or
restricted stock to a committee consisting of one director in
order to effectuate awards to newly hired employees or to
existing employees for promotion and retention purposes. Awards
granted by this committee of one are limited to only new hire,
promotion, and retention awards and such awards are reported to
the committee at each of its meetings. Grants of stock options
and restricted stock to eligible newly hired executive officers
and newly elected directors are reviewed at the next regularly
scheduled committee meeting following their hire date or
election.
All of the options granted by the committee vest one-third per
year on each of the first three anniversaries of the grant date
and have a ten year term. Some of the shares of restricted stock
granted by the committee to our named executive officers have a
three-year cliff vesting schedule (i.e., the restricted stock
vests 100% on the third anniversary of the grant date) and some
of the shares of restricted stock granted by the committee vest
one-third per year on each of the first three anniversaries of
the grant date.
In connection with the May 2010 appointment of Mr. Butz as
Senior Vice President, Chief Financial Officer and Treasurer and
Mr. Carson as Chief Accounting Officer, the committee
approved an award of 90,000 stock options to Mr. Butz and
75,000 stock options to Mr. Carson, which vest one-third
per year.
At its meeting in the first quarter of 2011, the committee
approved annual equity awards to its named executive officers,
which consisted of a restricted share grant and a performance
grant. The performance grant constitutes 56% of the target level
of grant. The restricted shares and performance grant vest
one-third per year on each of the first three anniversaries of
the grant date; however, the vesting of the performance grant is
contingent upon meeting the established consolidated safety and
EBITDA metrics at a weighting of 50% each, with vesting prorated
between threshold, target and maximum levels:
The following table sets forth the grants made by the committee
to the named executive officers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Grant
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
Number of
|
|
|
Performance
|
|
|
Performance
|
|
|
Performance
|
|
|
|
Restricted
|
|
|
Shares
|
|
|
Shares
|
|
|
Shares
|
|
|
|
Shares
|
|
|
Issuable at
|
|
|
Issuable at
|
|
|
Issuable at
|
|
Name
|
|
Granted
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
John T. Rynd
|
|
|
93,026
|
|
|
|
78,487
|
|
|
|
118,026
|
|
|
|
156,974
|
|
Stephen M. Butz
|
|
|
55,815
|
|
|
|
47,092
|
|
|
|
70,815
|
|
|
|
94,185
|
|
James W. Noe
|
|
|
55,815
|
|
|
|
47,092
|
|
|
|
70,815
|
|
|
|
94,185
|
|
Terrell L. Carr
|
|
|
55,815
|
|
|
|
47,092
|
|
|
|
70,815
|
|
|
|
94,185
|
|
Troy L. Carson
|
|
|
22,326
|
|
|
|
18,837
|
|
|
|
28,326
|
|
|
|
37,674
|
|
Lisa W. Rodriguez
|
|
|
22,326
|
|
|
|
18,837
|
|
|
|
28,326
|
|
|
|
37,674
|
|
28
Retirement,
Perquisites and Other Personal Benefits
401(k)
Plan
All eligible employees, including the named executive officers,
may participate in our 401(k) plan. The plan is a tax-qualified,
defined contribution retirement plan, which is designed to
assist participants with saving for retirement. Eligible
employees, including the named executive officers, are allowed
to direct pre-tax contributions (up to an annual limit
prescribed each year by the Internal Revenue Service) to the
plan from their compensation. Beginning January 1, 2008, we
made matching contributions equal to the amount of each
employees contribution, up to a maximum of 6% of
compensation each pay period. Effective as of April 1,
2009, we reduced the matching contributions to equal the amount
of each employees contribution, up to a maximum of 3% of
compensation each pay period. Subsequently, effective as of
August 1, 2009, we eliminated the matching contribution for
an indefinite period of time. All employee contributions to the
plan, as well as our matching contributions, are fully vested
from the time of contribution.
Deferred
Compensation Plan
The named executive officers, in addition to other executives
and certain other key employees, are entitled to participate in
our deferred compensation plan. Participating employees can
defer up to 80% of their base salary and 100% of any annual
bonus paid from the HERO Plan. Participants are also eligible
for discretionary contributions that we may choose to make under
this plan. Discretionary contributions could be made in
particular circumstances where, for example, a
participants deferrals under the deferred compensation
plan adversely affected the matching contributions under the
401(k) plan for that employee. In addition, a discretionary
contribution could be made if a participants
compensation for purposes of computing matching
contributions under the 401(k) plan were to exceed the Internal
Revenue Service limit on the amount of compensation
that is eligible for match under the 401(k) plan. The purpose of
the deferred compensation plan is to provide the participants
with the ability to defer federal income taxation on a portion
of their compensation. Please see Tax
Matters for additional information about tax
considerations related to deferred compensation.
Perquisites
and Other Personal Benefits
We provide named executive officers with perquisites and other
personal benefits that we and the committee believe are
reasonable and consistent with the overall compensation program
to better enable us to attract and retain superior employees for
key positions. The committee compared the levels of limited
perquisites and other personal benefits provided to our named
executive officers in 2010 with those common among the peer
group, and determined to continue that level of perquisites and
other personal benefits in 2011.
Each of the named executive officers is eligible for
reimbursement for financial planning assistance (up to $5,000
per year) and an annual health physical, and certain of our
executive officers are eligible for club memberships, limited to
one social club membership and one country club membership. We
also provide additional life insurance and disability benefits
as follows:
|
|
|
|
|
life insurance two times annual earnings up to
maximum benefit of $1,200,000;
|
|
|
|
short-term disability 100% of weekly earnings up to
26 weeks; and
|
|
|
|
long-term disability two-thirds of monthly earnings
up to $14,500 per month.
|
Employment
Agreements
We have entered into executive employment agreements with each
of the named executive officers. For additional information
about these agreements and the payments that may be made under
these agreements in the event of a termination or change in
control, please read Summary Compensation
Table, Potential Payments Upon
Termination or Change of Control and
Employment Agreements.
29
Equity
Ownership Guidelines
In order to align further the interests of our management and
our stockholders and further promote our commitment to sound
corporate governance, we have established the following equity
ownership guidelines applicable to executive officers:
|
|
|
Name
|
|
Ownership Guidelines
|
|
CEO
|
|
Four times annual base salary
|
CFO and any President reporting to the CEO
|
|
Two times annual base salary
|
Vice President reporting to the CEO
|
|
One times annual base salary
|
Vice President not reporting to the CEO and other
designated executive officers
|
|
One-half times annual base salary
|
Executive officers are expected to attain these minimum levels
of stock ownership by January 1, 2012, for executives
employed on January 1, 2007, and, for any executive officer
appointed after January 1, 2007, on the fifth January 1
that occurs at least one year following the date of appointment.
Until an executive officer achieves the ownership guidelines,
the executive officer is required to retain at least 50% of the
net shares received under the 2004 LTIP. Net shares refer to the
number of shares received after shares are sold or netted to pay
the applicable exercise price
and/or
applicable taxes.
In addition to common stock owned, the value of shares of
restricted stock granted under the 2004 LTIP is included in the
calculation. For this purpose, common stock and restricted stock
are valued based on the greater of (i) the price of our
common stock on the date the common stock was acquired (and in
the case of restricted stock, the date of vesting), or
(ii) the price of our common stock as of the date of the
committees annual review of executive equity ownership.
As of March 6, 2011, three of our named executive officers,
Mr. Rynd, Mr. Carr, and Ms. Rodriguez, exceed the
equity ownership guidelines described above, as set forth in the
following table:
|
|
|
|
|
|
|
|
|
Name
|
|
Base Salary
|
|
Value of Equity
|
|
John T. Rynd
|
|
$
|
630,000
|
|
|
$
|
3,524,811
|
|
Stephen M. Butz
|
|
$
|
300,000
|
|
|
$
|
29,739
|
|
James W. Noe
|
|
$
|
337,500
|
|
|
$
|
149,436
|
|
Terrell L. Carr
|
|
$
|
274,500
|
|
|
$
|
362,618
|
|
Troy L. Carson
|
|
$
|
250,000
|
|
|
$
|
81,741
|
|
Lisa W. Rodriguez
|
|
$
|
235,000
|
|
|
$
|
1,371,646
|
|
Tax
Matters
Deductibility
of Executive Compensation
As part of its role, the committee gives some consideration to
the deductibility of executive compensation under
Section 162(m) of the Internal Revenue Code, which provides
that we may not deduct certain compensation in excess of
$1,000,000 that is paid to certain individuals. The committee
may approve compensation that will be subject to and in excess
of the deduction limitations under Section 162(m) of the
Internal Revenue Code to ensure competitive levels of total
compensation for executive officers is paid to certain
individuals.
Non-Qualified
Deferred Compensation
To the extent one or more elements of compensation provided to
our employees are subject to Section 409A of the Internal
Revenue Code, we intend that those elements comply with the
necessary requirements so that the employees will not be subject
to increased income taxes, penalty and interest.
Section 409A was added to the Internal Revenue Code by the
American Jobs Creation Act of 2004 and requires that certain
elements of deferred compensation comply with
specific deferral and payment rules to avoid the imposition on
the employee of an additional 20% income tax and, in some
circumstances, penalties and interest. We believe that, if the
adverse tax consequences of Section 409A become applicable
to elements of our compensation arrangements, such
30
arrangements would be less efficient and less effective in
incentivizing and retaining our employees. Therefore, to the
extent reasonably practical, we intend to operate our
compensation arrangements and to amend or modify our programs
and awards as necessary to make them compliant with
Section 409A.
Shareholder
Advisory Vote on Executive Compensation
Section 951 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act requires the SEC to adopt rules
requiring us to seek a non-binding advisory vote from our
stockholders to approve the compensation awarded to our
executive officers disclosed pursuant to Section 14A of the
Exchange Act and Item 402 of
Regulation S-K.
We have not previously held a shareholder advisory vote on
executive compensation in determining compensation policies and
decisions.
31
REPORT OF
THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed with our
management the Compensation Discussion and Analysis included in
this proxy statement. Based on that review and discussion, the
Compensation Committee has recommended to the board of directors
that the Compensation Discussion and Analysis be included in
this proxy statement.
COMPENSATION COMMITTEE
Thomas M Hamilton, Chairman
F. Gardner Parker
Thierry Pilenko
March 6, 2011
32
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The table below summarizes the total compensation paid or earned
for the years ended December 31, 2010, 2009 and 2008 by our
Chief Executive Officer, two officers who served as our Chief
Financial Officer during fiscal year 2010, and the three next
most highly compensated executive officers for 2010. We have
entered into employment agreements with all of the named
executive officers currently employed by our company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Stock Awards
|
|
Options Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
|
|
Principal Position
|
|
Year
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)(1)
|
|
($)(4)
|
|
($)
|
|
|
|
John T. Rynd
|
|
|
2010
|
|
|
$
|
630,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
519,900
|
|
|
$
|
1,366,164
|
|
|
$
|
|
|
|
$
|
2,516,064
|
|
|
|
|
|
Chief Executive
|
|
|
2009
|
|
|
$
|
653,962
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
253,750
|
|
|
$
|
390,600
|
|
|
$
|
19,627
|
|
|
$
|
1,317,939
|
|
|
|
|
|
Officer and President
|
|
|
2008
|
|
|
$
|
556,923
|
|
|
$
|
|
|
|
$
|
1,382,370
|
|
|
$
|
1,267,560
|
|
|
$
|
245,000
|
|
|
$
|
33,500
|
|
|
$
|
3,485,353
|
|
|
|
|
|
Stephen M. Butz(5)
|
|
|
2010
|
|
|
$
|
276,000
|
|
|
$
|
117,500
|
|
|
$
|
|
|
|
$
|
231,960
|
|
|
$
|
338,337
|
|
|
$
|
|
|
|
$
|
963,797
|
|
|
|
|
|
Senior Vice President,
|
|
|
2009
|
|
|
$
|
232,462
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
29,000
|
|
|
$
|
65,800
|
|
|
$
|
5,813
|
|
|
$
|
333,075
|
|
|
|
|
|
Chief Financial Officer
|
|
|
2008
|
|
|
$
|
208,077
|
|
|
$
|
34,900
|
|
|
$
|
99,996
|
|
|
$
|
88,171
|
|
|
$
|
30,100
|
|
|
$
|
12,003
|
|
|
$
|
473,247
|
|
|
|
|
|
and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James W. Noe
|
|
|
2010
|
|
|
$
|
337,500
|
|
|
$
|
187,500
|
|
|
$
|
|
|
|
$
|
259,950
|
|
|
$
|
446,007
|
|
|
$
|
|
|
|
$
|
1,230,957
|
|
|
|
|
|
Senior Vice President,
|
|
|
2009
|
|
|
$
|
350,337
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
108,750
|
|
|
$
|
132,030
|
|
|
$
|
865
|
|
|
$
|
591,982
|
|
|
|
|
|
General Counsel and Chief
Compliance Officer
|
|
|
2008
|
|
|
$
|
337,212
|
|
|
$
|
21,250
|
|
|
$
|
435,880
|
|
|
$
|
373,428
|
|
|
$
|
78,750
|
|
|
$
|
48,478
|
|
|
$
|
1,294,998
|
|
|
|
|
|
Terrell L. Carr
|
|
|
2010
|
|
|
$
|
274,500
|
|
|
$
|
152,500
|
|
|
$
|
|
|
|
$
|
259,950
|
|
|
$
|
392,639
|
|
|
$
|
|
|
|
$
|
1,079,589
|
|
|
|
|
|
Vice President,
|
|
|
2009
|
|
|
$
|
284,941
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
94,250
|
|
|
$
|
48,381
|
|
|
$
|
5,961
|
|
|
$
|
433,533
|
|
|
|
|
|
Worldwide Operations (Drilling)
|
|
|
2008
|
|
|
$
|
305,000
|
|
|
$
|
57,346
|
|
|
$
|
358,960
|
|
|
$
|
311,190
|
|
|
$
|
117,654
|
|
|
$
|
13,800
|
|
|
$
|
1,163,950
|
|
|
|
|
|
Troy L. Carson
|
|
|
2010
|
|
|
$
|
240,769
|
|
|
$
|
112,500
|
|
|
$
|
|
|
|
$
|
210,630
|
|
|
$
|
265,530
|
|
|
$
|
|
|
|
$
|
829,429
|
|
|
|
|
|
Chief Accounting Officer
|
|
|
2009
|
|
|
$
|
221,827
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
29,000
|
|
|
$
|
63,000
|
|
|
$
|
5,553
|
|
|
$
|
319,380
|
|
|
|
|
|
|
|
|
2008
|
|
|
$
|
193,079
|
|
|
$
|
37,000
|
|
|
$
|
58,972
|
|
|
$
|
52,902
|
|
|
$
|
28,000
|
|
|
$
|
13,960
|
|
|
$
|
383,913
|
|
|
|
|
|
Lisa W. Rodriguez(6)
|
|
|
2010
|
|
|
$
|
281,154
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
259,950
|
|
|
$
|
418,553
|
|
|
$
|
|
|
|
$
|
959,657
|
|
|
|
|
|
Vice President, Human
|
|
|
2009
|
|
|
$
|
373,692
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
126,875
|
|
|
$
|
171,360
|
|
|
$
|
10,787
|
|
|
$
|
682,714
|
|
|
|
|
|
Resources
|
|
|
2008
|
|
|
$
|
374,808
|
|
|
$
|
37,000
|
|
|
$
|
538,440
|
|
|
$
|
466,785
|
|
|
$
|
98,000
|
|
|
$
|
9,692
|
|
|
$
|
1,524,725
|
|
|
|
|
|
|
|
|
(1) |
|
Cash bonuses paid under the HERO Plan for 2010, 2009 and 2008
performance, as well as cash bonuses under the Cash Performance
Incentive and Retention Plan for 2010, are listed under the
column Non-Equity Incentive Plan Compensation. Cash
bonuses paid under the Retention Program, as eligible
March 1, 2010, were $117,500, $187,500, $152,500 and
$112,500 to Messrs. Butz, Noe, Carr, and Carson,
respectively, and are listed under the column Bonus.
Additionally, listed in the column Bonus in 2008,
the amounts of $34,900, $21,250, $57,346, $37,000 and $37,000
represent a discretionary bonus to Messrs. Butz, Noe, Carr
and Carson and Ms. Rodriguez, respectively. |
|
(2) |
|
The amounts in this column reflect the aggregate grant date fair
value with respect to restricted stock during the years ended
December 31, 2010, 2009 and 2008 in accordance with
Financial Accounting Standards Board Accounting Standards
Codification Topic 718, Compensation Stock
Compensation (FASB ASC Topic 718). Assumptions used
in the calculation of these amounts are included in Note 7
to the audited financial statements included in our annual
report on
Form 10-K
for the year ended December 31, 2010 (the
Form 10-K).
These amounts reflect the aggregate grant date fair value and do
not correspond to the actual value that will be recognized by
the executive. |
|
(3) |
|
The amounts in this column reflect the aggregate grant date fair
value with respect to stock options during the years ended
December 31, 2010, 2009 and 2008 in accordance with FASB
ASC Topic 718. Assumptions used in the calculation of these
amounts are included in Note 7 to the audited financial
statements included in the
Form 10-K.
These amounts reflect the aggregate grant date fair value and do
not correspond to the actual value that will be recognized by
the executive. |
|
(4) |
|
The amounts shown in this column reflect All Other Compensation
for each named executive officer, which in the case of
perquisites and other personal benefits equal or exceed $10,000
in the aggregate. Amounts include the following: |
|
|
|
|
|
matching contributions under the 401(k) plan;
|
33
|
|
|
|
|
matching contributions under the Deferred Compensation Plan;
|
|
|
|
club memberships; and
|
|
|
|
financial planning assistance.
|
|
|
|
(5) |
|
Mr. Butz became our Senior Vice President, Chief Financial
Officer and Treasurer in May 2010 after serving as our Vice
President, Finance and Treasurer. |
|
(6) |
|
Ms. Rodriguez resigned as Senior Vice President and Chief
Financial Officer in May 2010 and was appointed Vice President,
Human Resources. |
Grants of
Plan-Based Awards for 2010
The table below reports all grants of plan-based awards made
during 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Exercise
|
|
Date Fair
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
or Base
|
|
Value of
|
|
|
|
|
Estimated Possible Payouts Under
|
|
Securities
|
|
Price of
|
|
Stock and
|
|
|
|
|
Non-Equity Incentive Plan Awards
|
|
Underlying
|
|
Option
|
|
Option
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Options
|
|
Awards
|
|
Awards
|
Name
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)(3)(4)
|
|
($/Sh)(5)
|
|
($/Sh)(6)
|
|
John T. Rynd
|
|
|
N/A(1
|
)
|
|
|
441,000
|
|
|
|
630,000
|
|
|
|
1,008,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A(2
|
)
|
|
|
653,000
|
|
|
|
1,306,000
|
|
|
|
1,959,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
2/24/2010
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
300,000
|
|
|
|
3.89
|
|
|
|
1.733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen M. Butz(7)
|
|
|
N/A(1
|
)
|
|
|
126,000
|
|
|
|
180,000
|
|
|
|
288,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A(2
|
)
|
|
|
168,000
|
|
|
|
336,000
|
|
|
|
504,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
2/24/2010
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
60,000
|
|
|
|
3.89
|
|
|
|
1.733
|
|
|
|
|
5/7/2010
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
90,000
|
|
|
|
3.09
|
|
|
|
1.422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James W. Noe
|
|
|
N/A(1
|
)
|
|
|
141,750
|
|
|
|
202,500
|
|
|
|
324,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A(2
|
)
|
|
|
202,500
|
|
|
|
405,000
|
|
|
|
607,500
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
2/24/2010
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
150,000
|
|
|
|
3.89
|
|
|
|
1.733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrell L. Carr
|
|
|
N/A(1
|
)
|
|
|
102,938
|
|
|
|
164,700
|
|
|
|
288,225
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A(2
|
)
|
|
|
250,000
|
|
|
|
500,000
|
|
|
|
750,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
2/24/2010
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
150,000
|
|
|
|
3.89
|
|
|
|
1.733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troy L. Carson
|
|
|
N/A(1
|
)
|
|
|
70,000
|
|
|
|
100,000
|
|
|
|
160,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A(2
|
)
|
|
|
150,000
|
|
|
|
300,000
|
|
|
|
450,000
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
2/24/2010
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
60,000
|
|
|
|
3.89
|
|
|
|
1.733
|
|
|
|
|
5/7/2010
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
75,000
|
|
|
|
3.09
|
|
|
|
1.422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lisa W. Rodriguez(8)
|
|
|
N/A(1
|
)
|
|
|
65,800
|
|
|
|
94,000
|
|
|
|
150,400
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
N/A(2
|
)
|
|
|
206,400
|
|
|
|
412,800
|
|
|
|
619,200
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
2/24/2010
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
150,000
|
|
|
|
3.89
|
|
|
|
1.733
|
|
|
|
|
(1) |
|
These amounts represent awards under the HERO Plan. For
additional information about the HERO Plan, please read
Compensation Discussion and Analysis
Short-term and Long-term Incentive and Retention
Compensation HERO Plan. |
|
(2) |
|
These amounts represent awards under the Cash Performance
Incentive and Retention Plan, which are to be paid over a two
year period. For additional information about the Cash
Performance Incentive and Retention Plan, please read
Compensation Discussion and Analysis
Short-term and Long-term Incentive and Retention
Compensation 2010 Executive Officer Cash Performance
Incentive and Retention Plan. |
|
(3) |
|
All awards in this column were made pursuant to our 2004 LTIP.
For additional information about the 2004 LTIP, please read
Compensation Discussion and Analysis 2010
Executive Compensation Components Incentive and
Retention Compensation Equity-Based Program. |
34
|
|
|
(4) |
|
This column consists of options to purchase our common stock.
The options become exercisable in three equal annual
installments beginning on the first anniversary of the grant
date and have a
10-year term. |
|
(5) |
|
The exercise price for awards granted in 2010 is equal to the
closing price of our common stock on the NASDAQ Global Select
Market on the grant date. The exercise price may be paid in cash
or by tendering shares of our common stock. Applicable tax
obligations may be paid in cash or by withholding of shares of
our common stock. |
|
(6) |
|
These amounts represent the fair value of stock options granted
to each executive during 2010 as calculated under FASB ASC Topic
718. For the relevant assumptions used to determine the
valuation of our awards, see Note 7 to the audited
financial statements included in the Form
10-K. |
|
(7) |
|
Mr. Butz became our Senior Vice President, Chief Financial
Officer and Treasurer in May 2010 after serving as our Vice
President, Finance and Treasurer. |
|
(8) |
|
Ms. Rodriguez resigned as Senior Vice President and Chief
Financial Officer in May 2010 and was appointed Vice President,
Human Resources. |
35
Outstanding
Equity Awards at Fiscal Year-End 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
Number of
|
|
Shares or
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Shares or
|
|
Units of
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Units of
|
|
Stock
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
Stock That
|
|
That
|
|
|
|
|
|
|
Options
|
|
Options
|
|
Exercise
|
|
Option
|
|
Have Not
|
|
Have Not
|
|
|
|
|
|
|
Exercisable
|
|
Unexercisable
|
|
Price
|
|
Expiration
|
|
Vested
|
|
Vested
|
|
|
Name
|
|
Grant Date
|
|
(#)
|
|
(#)
|
|
($)
|
|
Date
|
|
(#)
|
|
($)(1)
|
|
|
|
John T. Rynd
|
|
|
11/1/2005
|
|
|
|
60,000
|
|
|
|
|
|
|
|
20.00
|
|
|
|
11/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2007
|
|
|
|
72,000
|
(2)
|
|
|
|
|
|
|
25.34
|
|
|
|
2/12/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
48,000
|
(2)
|
|
|
24,000
|
(2)
|
|
|
25.64
|
|
|
|
2/14/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6/23/2008
|
|
|
|
24,000
|
(2)
|
|
|
12,000
|
(2)
|
|
|
35.75
|
|
|
|
6/23/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2009
|
|
|
|
116,667
|
(2)
|
|
|
233,333
|
(2)
|
|
|
1.65
|
|
|
|
2/25/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/24/2010
|
|
|
|
|
|
|
|
300,000
|
(2)
|
|
|
3.89
|
|
|
|
2/24/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,000
|
(3)
|
|
|
114,840
|
|
|
|
|
|
|
|
|
6/23/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
(3)
|
|
|
52,200
|
|
|
|
|
|
Stephen M. Butz(4)
|
|
|
11/1/2005
|
|
|
|
6,000
|
|
|
|
|
|
|
|
20.00
|
|
|
|
11/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2007
|
|
|
|
7,400
|
(2)
|
|
|
|
|
|
|
25.34
|
|
|
|
2/12/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
5,667
|
(2)
|
|
|
2,833
|
(2)
|
|
|
25.64
|
|
|
|
2/14/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2009
|
|
|
|
13,334
|
(2)
|
|
|
26,666
|
(2)
|
|
|
1.65
|
|
|
|
2/25/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/24/2010
|
|
|
|
|
|
|
|
60,000
|
(2)
|
|
|
3.89
|
|
|
|
2/24/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2010
|
|
|
|
|
|
|
|
90,000
|
(2)
|
|
|
3.09
|
|
|
|
5/7/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,300
|
(3)
|
|
|
4,524
|
|
|
|
|
|
James W. Noe
|
|
|
11/1/2005
|
|
|
|
6,250
|
|
|
|
|
|
|
|
20.00
|
|
|
|
11/1/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/12/2007
|
|
|
|
43,000
|
(2)
|
|
|
|
|
|
|
25.34
|
|
|
|
2/12/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
24,000
|
(2)
|
|
|
12,000
|
(2)
|
|
|
25.64
|
|
|
|
2/14/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2009
|
|
|
|
50,000
|
(2)
|
|
|
100,000
|
(2)
|
|
|
1.65
|
|
|
|
2/25/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/24/2010
|
|
|
|
|
|
|
|
150,000
|
(2)
|
|
|
3.89
|
|
|
|
2/24/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,000
|
(3)
|
|
|
59,160
|
|
|
|
|
|
Terrell L. Carr
|
|
|
2/12/2007
|
|
|
|
5,000
|
(2)
|
|
|
|
|
|
|
25.34
|
|
|
|
2/12/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
20,000
|
(2)
|
|
|
10,000
|
(2)
|
|
|
25.64
|
|
|
|
2/14/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2009
|
|
|
|
43,334
|
(2)
|
|
|
86,666
|
(2)
|
|
|
1.65
|
|
|
|
2/25/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/24/2010
|
|
|
|
|
|
|
|
150,000
|
(2)
|
|
|
3.89
|
|
|
|
2/24/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,000
|
(3)
|
|
|
48,720
|
|
|
|
|
|
Troy L. Carson
|
|
|
2/14/2008
|
|
|
|
3,400
|
(2)
|
|
|
1,700
|
(2)
|
|
|
25.64
|
|
|
|
2/14/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2009
|
|
|
|
13,334
|
(2)
|
|
|
26,666
|
(2)
|
|
|
1.65
|
|
|
|
2/25/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/24/2010
|
|
|
|
|
|
|
|
60,000
|
(2)
|
|
|
3.89
|
|
|
|
2/24/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5/7/2010
|
|
|
|
|
|
|
|
75,000
|
(2)
|
|
|
3.09
|
|
|
|
5/7/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
766
|
(3)
|
|
|
2,666
|
|
|
|
|
|
Lisa W. Rodriguez(5)
|
|
|
3/15/2007
|
|
|
|
50,000
|
(2)
|
|
|
|
|
|
|
26.60
|
|
|
|
3/15/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
30,000
|
(2)
|
|
|
15,000
|
(2)
|
|
|
25.64
|
|
|
|
2/14/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/25/2009
|
|
|
|
58,334
|
(2)
|
|
|
116,666
|
(2)
|
|
|
1.65
|
|
|
|
2/25/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/24/2010
|
|
|
|
|
|
|
|
150,000
|
(2)
|
|
|
3.89
|
|
|
|
2/24/2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2/14/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,000
|
(3)
|
|
|
73,080
|
|
|
|
|
|
|
|
|
(1) |
|
This column represents the closing price of our common stock on
December 31, 2010 of $3.48 per share multiplied by the
number of shares of restricted stock. |
|
(2) |
|
These options become exercisable in three equal annual
installments beginning on the first anniversary of the grant
date. |
36
|
|
|
(3) |
|
These shares of restricted stock all vest on the third
anniversary of the grant date, except for the 1,300 shares
of restricted stock owned by Mr. Butz and the
766 shares owned by Mr. Carson, which vest in three
equal annual installments beginning on the first anniversary of
the grant date. |
|
(4) |
|
Mr. Butz became our Senior Vice President, Chief Financial
Officer and Treasurer in May 2010 after serving as our Vice
President, Finance and Treasurer. |
|
(5) |
|
Ms. Rodriguez resigned as Senior Vice President and Chief
Financial Officer in May 2010 and was appointed Vice President,
Human Resources. |
Option
Exercises and Stock Vested for 2010
None of the named executive officers exercised stock options and
four grants of restricted stock vested during 2010 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
Value
|
|
|
Shares
|
|
|
Value
|
|
|
|
Acquired
|
|
|
Realized on
|
|
|
Acquired
|
|
|
Realized on
|
|
|
|
on Exercise
|
|
|
Exercise
|
|
|
on Vesting
|
|
|
Vesting
|
|
Name
|
|
(#)
|
|
|
($)(1)
|
|
|
(#)
|
|
|
($)(2)
|
|
|
John T. Rynd
|
|
|
|
|
|
|
|
|
|
|
8,100
|
|
|
|
33,210
|
|
Stephen M. Butz(3)
|
|
|
|
|
|
|
|
|
|
|
4,050
|
|
|
|
16,605
|
|
James W. Noe
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
20,500
|
|
Terrell L. Carr
|
|
|
|
|
|
|
|
|
|
|
6,833
|
|
|
|
28,085
|
|
Troy L. Carson
|
|
|
|
|
|
|
|
|
|
|
3,267
|
|
|
|
13,445
|
|
Lisa W. Rodriguez(4)
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
40,590
|
|
|
|
|
(1) |
|
Represents the difference between the sale price of our common
stock at exercise and the exercise price of the options. |
|
(2) |
|
Represents the value of the shares on the vesting date based on
the closing price of our common stock on such date. |
|
(3) |
|
Mr. Butz became our Senior Vice President, Chief financial
Officer and Treasurer in May 2010 after serving as our Vice
President, Finance and Treasurer. |
|
(4) |
|
Ms. Rodriguez resigned as Senior Vice President and Chief
Financial Officer in May 2010 and was appointed Vice President,
Human Resources. |
Non-Qualified
Deferred Compensation
In January 2007, we implemented the Hercules Offshore, Inc.
Deferred Compensation Plan, effective as of January 1,
2007. The plan was approved by our board of directors. Directors
and, subject to the discretion of a committee appointed by the
board of directors to administer the plan, certain management
and other highly compensated employees of our company, including
our Chief Executive Officer and our Chief Financial Officer, are
eligible to participate in the plan. Participants may elect to
defer, on a pre-tax basis, up to 80% of base salary and up to
100% of any director fees, bonus or compensation under the 2004
LTIP. All deferrals are credited to a deferred compensation
account. We may make contributions to a participants
deferred compensation account (1) to restore any 401(k)
matching contribution the participant may forego because of
compensation deferred into the plan and (2) at the discretion of
the board of directors, to recognize a participants
service to our company. Participants are fully vested in their
deferrals at all times; however, contributions by us to a
participants deferred compensation account may be subject
to vesting requirements. Compensation deferred under the plan
earns interest based on the performance of measurement funds
selected by the participant.
Under certain circumstances, including in connection with a
change in control of our company, distributions of amounts
deferred under the plan may accelerate. We may terminate the
plan at any time. An optional termination of the plan by us will
not result in a distribution acceleration except as permitted by
the Internal Revenue Code and related Treasury guidance in
connection with a change in control.
37
The plan is administered by the compensation committee.
Following a change in control, the members of the committee in
place immediately prior to the change in control may appoint an
independent third party to administer the plan.
In connection with the adoption of the plan, we adopted a trust
agreement with JPMorgan Chase Bank, N.A. as the trustee. We
currently deposit amounts to the trust under the trust agreement
as such amounts are deferred by participants or contributed by
us. The trust is a rabbi trust, meaning that the
funds held by the trustee remain subject to the claims of our
general creditors in the event of our insolvency.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Registrant
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
Aggregate
|
|
|
|
Contributions in
|
|
|
Contributions in
|
|
|
Earnings
|
|
|
Withdrawals/
|
|
|
Balance
|
|
|
|
Last FY
|
|
|
Last FY
|
|
|
in Last FY
|
|
|
Distributions
|
|
|
at Last FYE
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
($)
|
|
|
($)
|
|
|
John T. Rynd
|
|
|
94,500
|
|
|
|
|
|
|
|
54,835
|
|
|
|
|
|
|
|
374,993
|
|
Stephen M. Butz(4)
|
|
|
|
|
|
|
|
|
|
|
1,764
|
|
|
|
|
|
|
|
11,101
|
|
James W. Noe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terrell L. Carr
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troy L. Carson
|
|
|
|
|
|
|
|
|
|
|
6,729
|
|
|
|
|
|
|
|
41,979
|
|
Lisa W. Rodriguez(5)
|
|
|
|
|
|
|
|
|
|
|
5,919
|
|
|
|
|
|
|
|
54,603
|
|
|
|
|
(1) |
|
Amounts reported in this column are included in the Summary
Compensation Table as salary, bonus and non-equity incentive
plan compensation, as applicable. |
|
(2) |
|
Amounts reported in this column are included in the Summary
Compensation Table as all other compensation. |
|
(3) |
|
Amounts reported in this column are not included in the Summary
Compensation Table. |
|
(4) |
|
Mr. Butz became our Senior Vice President, Chief financial
Officer and Treasurer in May 2010 after serving as our Vice
President, Finance and Treasurer. |
|
(5) |
|
Ms. Rodriguez resigned as Senior Vice President and Chief
Financial Officer in May 2010 and was appointed Vice President,
Human Resources. |
Potential
Payments Upon Termination or Change of Control
The tables below reflect the amount of compensation that would
be payable to each of our named executive officers in the event
of termination of the executives employment without cause,
termination by the executive for good reason and
termination in the event of disability or death of the
executive, and in the event of a termination following a change
of control. The amounts shown in the table assume that the
termination was effective as of December 31, 2010, and thus
include amounts earned through such time and are estimates of
the amounts which would be paid out to the executives upon their
termination. The actual amounts to be paid out and the value of
shares of common stock can be determined only at the time of the
executives separation from our company.
Payment
or Benefit Upon Change of Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
|
|
|
|
Cash
|
|
|
Welfare
|
|
|
|
|
|
Options and
|
|
|
|
|
|
|
Severance
|
|
|
Benefit
|
|
|
Excise Tax
|
|
|
Restricted
|
|
|
|
|
|
|
Amount
|
|
|
Continuation
|
|
|
Payment
|
|
|
Shares
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)(2)
|
|
|
($)
|
|
|
John T. Rynd
|
|
|
4,200,000
|
|
|
|
33,000
|
|
|
|
1,551,387
|
|
|
|
594,039
|
|
|
|
6,378,426
|
|
Stephen M. Butz(3)
|
|
|
1,200,000
|
|
|
|
30,570
|
|
|
|
|
|
|
|
88,423
|
|
|
|
1,318,993
|
|
James W. Noe
|
|
|
1,500,000
|
|
|
|
30,874
|
|
|
|
520,102
|
|
|
|
242,160
|
|
|
|
2,293,136
|
|
Terrell L. Carr
|
|
|
1,220,000
|
|
|
|
29,769
|
|
|
|
422,680
|
|
|
|
207,319
|
|
|
|
1,879,768
|
|
Troy L. Carson
|
|
|
700,000
|
|
|
|
29,644
|
|
|
|
|
|
|
|
80,714
|
|
|
|
810,358
|
|
Lisa W. Rodriguez(4)
|
|
|
658,000
|
|
|
|
30,044
|
|
|
|
|
|
|
|
286,579
|
|
|
|
974,623
|
|
38
|
|
|
(1) |
|
The aggregate value of the accelerated vesting of unvested
in-the-money
options at December 31, 2010 (computed by multiplying
$3.48, the closing market price of shares of our common stock on
the last trading day of 2010, times the number of shares subject
to the options and subtracting the aggregate exercise price for
the options) were as follows: Mr. Rynd 233,333
options valued at $426,999; Mr. Butz 116,666
options valued at $83,899; Mr. Noe 100,000
options valued at $183,000; Mr. Carr 86,666
options valued at $158,599; Mr. Carson 101,666
options valued at $78,049; and Ms. Rodriguez
116,666 options valued at $213,499, as remaining options were
out of the money as of that date. |
|
(2) |
|
The aggregate value of the accelerated vesting of restricted
shares at December 31, 2010 (computed by multiplying $3.48,
the closing market price of shares of our common stock on the
last trading day of 2010, times the total number of restricted
shares held), were as follows: Mr. Rynd
48,000 shares valued at $167,040; Mr. Butz
1,300 shares valued at $4,524; Mr. Noe
17,000 shares valued at $59,160; Mr. Carr
14,000 shares valued at $48,720;
Mr. Carson 766 shares valued at $2,666;
and Ms. Rodriguez 21,000 shares valued at
$73,080. |
|
(3) |
|
Mr. Butz became our Senior Vice President, Chief financial
Officer and Treasurer in May 2010 after serving as our Vice
President, Finance and Treasurer. |
|
(4) |
|
Ms. Rodriguez resigned as Senior Vice President and Chief
Financial Officer in May 2010 and was appointed our Vice
President, Human Resources. |
Payment
or Benefit Outside of Change of Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting of
|
|
|
|
|
|
|
Cash
|
|
|
Welfare
|
|
|
|
|
|
Options and
|
|
|
|
|
|
|
Severance
|
|
|
Benefit
|
|
|
Excise Tax
|
|
|
Restricted
|
|
|
|
|
|
|
Amount
|
|
|
Continuation
|
|
|
Payment
|
|
|
Shares
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
John T. Rynd
|
|
|
2,843,994
|
|
|
|
33,000
|
|
|
|
|
|
|
|
|
|
|
|
2,876,994
|
|
Stephen M. Butz(1)
|
|
|
980,732
|
|
|
|
30,570
|
|
|
|
|
|
|
|
|
|
|
|
1,011,302
|
|
James W. Noe
|
|
|
1,242,492
|
|
|
|
30,874
|
|
|
|
|
|
|
|
|
|
|
|
1,273,366
|
|
Terrell L. Carr
|
|
|
675,290
|
|
|
|
29,769
|
|
|
|
|
|
|
|
|
|
|
|
705,059
|
|
Troy L. Carson
|
|
|
551,339
|
|
|
|
29,644
|
|
|
|
|
|
|
|
|
|
|
|
580,983
|
|
Lisa W. Rodriguez(2)
|
|
|
549,734
|
|
|
|
30,044
|
|
|
|
|
|
|
|
|
|
|
|
579,778
|
|
|
|
|
(1) |
|
Mr. Butz became our Senior Vice President, Chief Financial
Officer and Treasurer in May 2010 after serving as our Vice
President, Finance and Treasurer. |
|
(2) |
|
Ms. Rodriguez resigned as Senior Vice President and Chief
Financial Officer in May 2010 and was appointed Vice President,
Human Resource. |
Employment
Agreements
We have entered into executive employment agreements with each
of the named executive officers currently employed by us. These
employment agreements have an indefinite term and may be
terminated at any time: (i) by us (a) for cause, or
(b) without a reason; (ii) by the executive
(x) for good reason, or (z) without a reason; or
(iii) upon the death or disability of the executive.
Each agreement provides a non-compete, non-solicitation, and
non-inducement clause for one year after any termination.
Under the employment agreements, each of the named executive
officers is entitled to health benefits and participation in our
incentive, savings and retirement plans, in each case equal to
those benefits provided to similarly situated senior executives
of us and our affiliated companies, and to the severance
benefits described below.
39
Payments Made upon Termination. Regardless of
the manner in which a named executive officers employment
terminates, he or she is entitled to receive certain amounts
earned during his or her term of employment, including:
|
|
|
|
|
any unpaid base salary through the date of termination;
|
|
|
|
any compensation previously deferred by the executive, to the
extent permitted by the plan under which the deferral was made
(together with any accrued interest or earnings thereon);
|
|
|
|
any earned but unpaid bonus awarded to the executive for any
previously completed taxable year;
|
|
|
|
the vested portion of grants pursuant to the 2004 LTIP;
|
|
|
|
amounts contributed under the deferred compensation
program; and
|
|
|
|
accrued vacation pay.
|
Termination Other Than Upon Change of
Control. Under the employment agreements with
each named executive officer, if employment is terminated (other
than termination by us for cause) or if the executive terminates
his employment in certain circumstances defined in the agreement
which constitute good reason, in addition to the
benefits listed under the heading
Payments Made upon Termination
above, the named executive officer will receive:
|
|
|
|
|
a lump sum severance payment of the sum of the executives
base salary and the bonus paid or payable in respect of the most
recently completed fiscal year of the company, or if no bonus
has been paid or is payable in respect of such year, any bonus
paid or payable in respect of the next preceding fiscal year, to
the executive multiplied:
|
|
|
|
|
|
for Mr. Rynd, Mr. Butz and Mr. Noe, by
two; and
|
|
|
|
for Ms. Rodriguez and Messrs. Carr and Carson, one and
one-half.
|
|
|
|
|
|
a lump sum amount equal to the then current cost of the
employer-provided welfare benefits (other than group health
plans) provided to the executive and his dependents, as of the
date of termination, calculated for the period from the date of
termination until the later of the expiration of the remaining
employment period or 18 months following the date of
termination.
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Retirement. In the event of the retirement of
a named executive officer, no additional compensation or
benefits are applicable.
Death or Disability. In the event of the death
or disability of a named executive officer, in addition to the
benefits listed under the headings Payments
Made upon Termination above, the named executive officer
or beneficiary will receive benefits under our disability plan
or payments under our life insurance plan, as applicable.
Change of Control. Under the employment
agreements with each named executive officer, if an
executives employment is terminated following a change of
control (other than termination by us for cause or by reason of
death or disability), in addition to the benefits listed under
the heading Payments Made upon
Termination above, the named executive officer will
receive:
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a lump sum severance payment of the sum of the executives
base salary and the target bonus (as a percentage of base
salary) payable to the executive for the year in which the
termination occurs to the executive multiplied by:
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for Mr. Rynd, by three;
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for Mr. Butz, and Messrs. Noe and Carr, by two and
one-half; and
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for Ms. Rodriguez and Mr. Carson, by two.
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a lump sum amount equal to the then current cost of the
employer-provided welfare benefits (other than group health
plans) provided to the executive and his dependents, as of the
date of termination, calculated
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40
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for the period from the date of termination until the later of
the expiration of the remaining employment period or
18 months following the date of termination.
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a tax
gross-up
payment equal to the amount of certain excise taxes which may be
imposed on the executive officer in connection with the change
of control.
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In addition, if the date of termination occurs within
24 months after a change of control, then all stock options
and shares of restricted stock held by the executive will
automatically vest and become exercisable. Under the agreements,
a change of control is deemed to occur:
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when any person (as defined in Sections 13(d)
and 14(d) of the Exchange Act) is or becomes the
beneficial owner (as defined in
Rule 13d-3
under the Exchange Act), directly or indirectly, of securities
of the company (not including in the amount of the securities
beneficially owned by such person any such securities acquired
directly from the company or its affiliates) representing 20% or
more of the combined voting power of the companys then
outstanding voting securities; provided, however, that the term
person shall not include (A) the company or any
of its subsidiaries, (B) a trustee or other fiduciary
holding securities under an employee benefit plan of the company
or any of its subsidiaries, (C) an underwriter temporarily
holding securities pursuant to an offering of such securities,
or (D) an entity owned, directly or indirectly, by the
stockholders of the company in substantially the same
proportions as their ownership of stock of the company;
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when the following individuals cease for any reason to
constitute a majority of our directors then serving: individuals
who, on the date hereof, constitute the board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest including but not limited to a consent solicitation,
relating to the election of directors of Hercules Offshore)
whose appointment or election by the board or nomination for
election by our stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office and voting on the matter who were either directors on the
date hereof or whose appointment, election or nomination for
election was previously so approved;
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upon the consummation of a reorganization, merger, consolidation
or other transaction, in any case, with respect to which persons
who were our stockholders immediately prior to such transaction
do not, immediately thereafter, own equity interests
representing at least 50% of the total combined voting power of
our company or the resulting reorganized, merged or consolidated
entity, as applicable; or
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when the stockholders of the company approve a plan of complete
liquidation of the company, or there is consummated the sale or
other disposition of all or substantially all of the assets of
the company and its subsidiaries taken as a whole (other than to
the company or one or more subsidiaries of the company.
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All of the employment agreements contain language that make them
compliant with the provisions of Section 409A of the
Internal Revenue Code and that minimizes the payment by the
executive officers of taxes under Section 409A. The
employment agreements provide that they be modified, at the
discretion of the board of directors, if necessary to bring any
provision of the agreements into compliance with
Section 409A.
Compensation
of Directors
Directors who are also full-time officers or employees of our
company receive no additional compensation for serving as
directors. For the compensation of Mr. Rynd, our Chief
Executive Officer and President, see the Summary Compensation
Table. All other directors received an annual retainer of
$25,000 in 2010. Each non-employee director also received a fee
of $1,500 for each board meeting and each committee meeting
attended in person and $1,000 for each board meeting and each
committee meeting in which they participated by telephone. In
addition, the chairman of the audit committee received an annual
fee of $15,000, and the chairman of each of the compensation
committee and the nominating and governance committee received
an annual fee of $10,000 in 2010. There was no annual or other
fee payable to the chairman of the special governance committee,
which did not meet in 2010 and was dissolved on July 11,
2010, pursuant to its charter. We also reimburse the reasonable
expenses incurred by the directors in attending meetings and
other company business.
41
At its meeting in the fourth quarter of 2010, the compensation
committee approved the compensation payable to non-employee
directors for 2011. The annual retainer payable to each
non-employee director was set at $55,000 for the first eight
meetings held in 2011, with an additional fee of $1,500 for each
additional meeting attended in person and $1,000 for each
additional meeting attended by telephone. The compensation
committee also approved incremental compensation for the
chairman of the board in an amount equal to $68,500, consisting
of a $36,000 cash retainer and $32,500 in equity compensation.
However, our chairman declined to accept this incremental
compensation for 2011. The annual retainers payable to the
chairmen of the companys committees are to remain the same
as they were for 2010, as are the fees payable to each
non-employee director for attending board and committee meetings.
The table below summarizes the total compensation paid or earned
by each of our non-employee directors for 2010.
Director
Compensation for 2010
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Fees
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Earned or
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Paid in
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Stock
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Option
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Cash
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Awards
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Awards
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Total
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Name
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($)
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($)(1)
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($)(2)
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($)
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Thomas N. Amonett
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46,000
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48,600
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8,665
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103,265
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Thomas R. Bates, Jr.(3)
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36,000
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48,600
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8,665
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93,265
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Suzanne V. Baer
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44,500
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48,600
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8,665
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101,765
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Thomas M Hamilton
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54,000
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48,600
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8,665
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111,265
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Thomas J. Madonna
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62,500
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48,600
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8,665
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119,765
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F. Gardner Parker
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62,000
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48,600
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8,665
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119,265
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Thierry Pilenko
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42,000
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48,600
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8,665
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99,265
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Steven A. Webster
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38,500
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48,600
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8,665
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95,765
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(1) |
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The amounts in this column reflect the aggregate grant date fair
value with respect to restricted stock during the year ended
December 31, 2010 in accordance with FASB ASC Topic 718.
Assumptions used in the calculation of these amounts are
included in Note 7 to the audited financial statements
included in our annual report on
Form 10-K
for the year ended December 31, 2010 (the
Form 10-K).
These amounts reflect the aggregate grant date fair value and do
not correspond to the actual value that will be recognized by
the Director. The aggregate number of stock awards outstanding
at December 31, 2010 was 120,000 shares of restricted
stock, which represents 15,000 shares held by each director
other than Mr. Rynd. These shares of restricted stock were
granted on May 11, 2010 at grant date fair value of $3.24
and vest on the date of the annual meeting of stockholders,
which is May 10, 2011. |
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(2) |
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The amounts in this column reflect the aggregate grant date fair
value of stock option awards in accordance with FASB ASC Topic
718. Assumptions used in the calculation of this amount are
included in Note 7 to the audited financial statements
included in the
Form 10-K.
Under the SEC rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based vesting
conditions. These amounts reflect the aggregate grant date fair
value and do not correspond to the actual value that will be
recognized by the Director. |
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(3) |
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Fees paid to Mr. Bates were paid to LR Hercules Holdings,
LP. |
Director
Equity Ownership Guidelines
As we have for our executive officers, we have also established
equity ownership guidelines for our directors. The guidelines
provide that each of our outside directors is expected to own
equity in the company valued at three times their annual
retainer, by March 24, 2011, or within three (3) years
from the date that such outside director joins our board. In
addition to common stock owned, the value of shares of
restricted stock granted under the 2004 LTIP is included in the
calculation. For this purpose, common stock and restricted stock
are valued based on the greater of (i) the price of our
common stock on the date the common stock was acquired (and in
the case of restricted stock, the
42
date of vesting), or (ii) the price of our common stock as
of the date of the committees annual review of executive
equity ownership.
As of March 14, 2011, all of our non-employee directors
exceed the equity ownership guidelines described above, as set
forth in the following table:
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Name
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Annual Retainer
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Value of Equity
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Thomas R. Bates
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$
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55,000
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$
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293,500
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Steven A. Webster
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$
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55,000
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$
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21,993,172
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Thomas N. Amonett
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$
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55,000
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$
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476,623
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Thomas J. Madonna
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$
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55,000
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$
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571,638
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Thierry Pilenko
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$
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55,000
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$
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216,751
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Suzanne V. Baer
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$
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55,000
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$
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448,214
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F. Gardner Parker
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$
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55,000
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$
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426,513
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Thomas M Hamilton
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$
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55,000
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$
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403,103
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ADVISORY
VOTE ON 2010 EXECUTIVE COMPENSATION
(Item 2 on Proxy Card)
Section 951 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act requires the SEC to adopt rules
requiring the Company to seek a non-binding advisory vote from
our stockholders to approve the compensation awarded to our
executive officers disclosed pursuant to Section 14A of the
Exchange Act and Item 402 of
Regulation S-K.
The Company has established comprehensive compensation programs
for our executive officers, including our named executive
officers, as described in this proxy statement. Stockholders
should reference and consider this information in evaluating the
Companys approach to compensating our executive officers.
Our compensation committee will continue to design compensation
arrangements with the objectives of emphasizing pay for
performance and aligning the financial interests of our
executives with the interests of long-term stockholders, and
require executives to retain ownership of a significant portion
of our common stock they receive as compensation. Please refer
to the sections entitled Compensation Discussion and
Analysis and Executive Compensation of this
proxy statement for a detailed discussion of the Companys
executive compensation in 2010.
You have the opportunity to vote for, against or abstain
from voting on approval of 2010 executive compensation. This
vote is a nonbinding advisory vote on 2010 executive
compensation. Accordingly, the following resolution will be
submitted for a shareholder vote at the 2011 Annual Meeting:
RESOLVED, that the stockholders of Hercules Offshore, Inc.
approve, on an advisory basis, the compensation of the
Companys Named Executive Officers, as disclosed pursuant
to Item 402 of Securities and Exchange Commission
Regulation S-K,
including the Compensation Discussion and Analysis, the
compensation tables and narrative disclosures.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL, ON AN ADVISORY BASIS, OF 2010 EXECUTIVE COMPENSATION.
ADVISORY
VOTE ON THE FREQUENCY OF
THE STOCKHOLDER VOTE ON EXECUTIVE COMPENSATION
(Item 3 on Proxy Card)
Section 951 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act requires the SEC to adopt rules
requiring the Company to seek a non-binding advisory vote from
our stockholders to determine the frequency with which the
Companys stockholders will vote to approve the
compensation awarded to our executive officers pursuant to
Section 14A of the Exchange Act.
You have the opportunity to vote for every one (1) year,
for every two (2) years, for every three (3) years or
abstain from voting on the frequency of the stockholder vote
on executive compensation. This vote is a nonbinding
43
advisory vote on the frequency of the stockholder vote on
executive compensation. Therefore, stockholders will not be
voting to approve or disapprove the recommendation of the Board
of Directors.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EVERY ONE
(1) YEAR, ON AN ADVISORY BASIS, IN RESPECT OF THE
FREQUENCY OF THE STOCKHOLDER VOTE ON EXECUTIVE COMPENSATION.
APPROVAL
OF THE AMENDED AND RESTATED HERCULES OFFSHORE
2004 LONG-TERM INCENTIVE PLAN
(Item 4 on Proxy Card)
Description
of the Proposal
Our board of directors has approved the amended and restated
Hercules Offshore 2004 Long-Term Incentive Plan, referred to as
the plan, to provide for an increase in the number of shares of
our common stock issuable under the plan by an additional
5,000,000 shares. The board of directors is requesting that
stockholders approve the plan in the form attached as
Annex A.
Increase in Shares. The purpose of the plan is
to provide an incentive to retain and attract persons of desired
training, experience and ability to serve as employees,
consultants and directors, to encourage the sense of
proprietorship of those persons and to stimulate the active
interest of those persons in our development and financial
success. The board of directors believes that the plan will
achieve its purpose and desires to have sufficient shares
authorized for issuance under the plan to achieve these goals.
Accordingly, we are proposing that the plan allow for the
issuance of an additional 5,000,000 shares of our common
stock.
Performance-Based Awards. Treasury regulations
under Section 162(m) of the Internal Revenue Code generally
require that stockholders approve the material terms of the
performance awards, including the per person annual limits on
certain types of awards. Accordingly, the plan provides that
awards of restricted stock, phantom stock or other stock awards
made to an individual employee in any calendar year cannot cover
an aggregate of more than 300,000 shares of common stock,
and awards of stock options or stock appreciation rights made to
an individual employee in any calendar year cannot cover an
aggregate of more than 600,000 shares of common stock. The
maximum aggregate amount of any cash award that may be paid to
an individual employee in respect of any calendar year is
$5,000,000.
In addition to the changes discussed above, the plan includes
certain other changes as necessary to update the plan for
current legal requirements and other changes designed to enhance
ease of administration.
Vote
Required
The affirmative vote of the holders of a majority of votes cast
at the Annual Meeting at which a majority of the outstanding
shares of our common stock are present in person or represented
by proxy will be required for approval of the amended and
restated Hercules Offshore 2004 Long-Term Incentive Plan.
Abstentions and broker non-votes will not be counted either in
favor of or against approval of Hercules
Proposal No. 4.
Board
Recommendation
Our board of directors recommends that stockholders vote FOR
the approval of the amended and restated Hercules Offshore 2004
Long-Term Incentive Plan. Subject to stockholder approval, the
plan will become effective in the form attached as
Annex A.
Principal Provisions of the Amended and Restated Hercules
Offshore 2004 Long-Term Incentive Plan
Our board of directors has adopted the plan for its employees,
consultants and directors. The number of employees, consultants
and directors participating in the plan will vary from year to
year. Approximately 1660 current employees and eight
non-employee directors are eligible to participate in the plan.
Of these eligible
44
participants, approximately 460 will participate, eight of
which are non-employee directors and the remainder of which are
employees. The plan authorizes the granting of awards in any
combination of the following:
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options to purchase shares of our common stock, which may be
incentive stock options within the meaning of Section 422
of the Internal Revenue Code or options that are not incentive
stock options (sometimes called nonqualified stock
options),
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restricted and unrestricted stock and other stock-based awards,
such as restricted stock units, phantom stock, and stock
appreciation rights, and
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cash awards.
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Administration. The plan is administered by
the compensation committee of our board of directors, referred
to as the committee, which has the authority to determine the
terms and conditions of each award and to adopt rules,
regulations and guidelines regarding the plan. Other than any
authority or duty reserved under the plan exclusively to the
committee, the committee may delegate its duties under the plan
to our chief executive officer or our other executive officers.
The committee may, in its discretion, provide for the extension
of the exercisability of an award, accelerate the vesting or
exercisability of an award, eliminate or make less restrictive
any restrictions contained in an award agreement, waive any
restriction or other provision of the plan or an award agreement
or otherwise amend or modify an award in any manner that is
either (a) not adverse to the participant holding the award
or (b) consented to by such participant.
At the discretion of the committee, a participant may be offered
an election to substitute an award for another award or awards
of the same or different type. However, the plan prohibits the
repricing of outstanding awards without stockholder approval.
Number of Shares. By this proposal we are
seeking stockholder approval to reserve for issuance under the
plan an additional 5,000,000 shares of our common stock. Up
to 250,000 shares may be issued as incentive stock options
within the meaning of Section 422 of the Internal Revenue
Code. As of December 31, 2010, the closing price of our
common stock as reported on the NASDAQ Global Select Market was
$3.48.
Stock Options. The committee is authorized
under the plan to grant options to purchase shares of our common
stock, which may be incentive stock options or nonqualified
stock options. Options will be evidenced by a written award
agreement with the participant, which will include any
provisions that the committee may specify, in accordance with
the terms of the plan. The exercise price of an option may not
be less than the fair market value of our common stock on the
date of grant. All incentive stock options granted under the
plan must have a term of no more than ten years, and no
participant may be granted an incentive stock option to the
extent that, upon the grant of that option, the aggregate fair
market value (as defined in the plan) of the common stock with
respect to which incentive stock options are exercisable for the
first time by the participant during any calendar year would
exceed $100,000. The exercise price, number of shares, terms and
conditions of exercise, whether a stock option may qualify as an
incentive stock option under the Internal Revenue Code, and
other terms of a stock option grant will be fixed by the
committee as of the grant date.
The exercise price of any stock option must be paid in full at
the time the stock is delivered to the participant. The exercise
price must be paid in cash or, if permitted by the committee and
elected by the participant, by means of a broker-assisted
cashless exercise, a pure cashless exercise, by tendering
previously owned shares of our common stock or shares issued
pursuant to an award under the plan or any combination of the
foregoing.
Stock Appreciation Rights. The committee is
authorized under the plan to grant stock appreciation rights, or
SARs, to employees and directors. The base amount against which
the appreciation of our common stock is measured to determine
the amount payable on the exercise of stock appreciation right
may not be less than the fair market value of our common stock
as the date of grant. Subject to the satisfaction of any
performance criteria or other conditions, an SAR represents the
right to the excess of the fair market value of our common stock
at the time of the exercise (or, if the proposal is approved, a
lesser value as provided in the applicable award agreement) over
the base amount of such SAR.
Restricted and Unrestricted Stock Awards. The
committee may make awards consisting of our common stock, which
may be subject to restrictions on transferability and other
restrictions that the committee chooses to
45
impose, including limitations on the right to vote or receive
dividends, if any, with respect to the common stock to which the
award relates. These awards may or may not be subject to
forfeiture upon termination of employment, upon a failure to
satisfy performance goals during an applicable restriction
period, or any other comparable measurement of performance.
Phantom Stock and Other Stock-Based
Awards. The committee may, subject to limitations
under applicable law, grant other awards that are payable in or
valued relative to shares of our common stock, such as
restricted stock units and phantom stock, as it deems to be
consistent with the purposes of the plan, including shares of
common stock awarded purely as a bonus and not subject to any
restrictions or conditions. The committee will determine the
terms and conditions of any other stock-based awards.
Cash Awards. The committee may grant awards
that are payable in cash, subject to such terms and conditions
as the committee may determine.
Performance Awards. Section 162(m) of the
Internal Revenue Code denies a tax deduction for certain
compensation in excess of $1 million paid to covered
employees of a publicly held corporation, unless the
compensation meets the exception for qualified performance-based
compensation. The committee is authorized to grant any award as
a performance-based award to comply with this exception.
Performance-based awards are those which are designed to vest or
pay out based on the achievement of one or more performance
goals. The plan permits the following performance-based
objectives for any grant or award intended to be granted as
qualified performance-based compensation under
Section 162(m) of the Internal Revenue Code:
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revenue,
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net income,
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stock price,
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market share,
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earnings per share,
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other earnings measures,
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return on equity,
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return on assets,
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costs,
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shareholder value,
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EBIT,
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EBITDA,
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funds from operations,
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cash flow,
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cash from operations,
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net cash flow,
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net cash flow before financing activities,
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other cash flow measures,
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total shareholder return,
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return on capital,
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return on invested capital,
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operating income,
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46
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after-tax operating income,
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utilization rates,
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successful closing of transactions,
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total market value, or
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safety and environmental performance measures.
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The plan further provides that we may designate a single goal
criterion or multiple goal criteria for performance measurement
purposes with the measurement based on absolute company or
business unit performances
and/or on
performance as compared with that of our peers. A performance
goal need not be based upon an increase or positive result under
a particular business criterion and could include, for example,
maintaining the status quo or limiting economic losses
(measured, in each case, by reference to specific business
criteria).
Deferred Payment. The committee may permit a
participant to defer the payment of an award in certain
circumstances. The payment of awards that have been deferred may
be paid in installments or in a single future lump-sum payment,
and may, in the discretion of the committee, be credited with
interest and dividend equivalents, depending upon the nature of
the award that has been deferred.
Amendment, Modification and
Termination. Subject to applicable stock exchange
or NASDAQ Global Select Market rules, the committee may at any
time amend or terminate the plan without stockholder approval,
unless such approval is required by applicable law. The
committee may amend or terminate any outstanding award without
approval of the participant; however, no amendment or
termination may be made that would otherwise adversely impact a
participant, without the consent of the participant.
Change of Control. Except as otherwise
provided in an option award agreement, if a change of control
(as defined in the plan) occurs and the agreements effectuating
the change of control do not provide for the assumption or
substitution of all options granted under the plan, then with
respect to any option that is not so assumed or substituted, the
committee, in its sole and absolute discretion, may take any or
all of the following actions to be effective as of the date of
the change of control (or as of any other date fixed by the
committee occurring within the
30-day
period before the date of the change of control):
(1) accelerate the vesting
and/or
exercisability of the option, (2) cancel the option in
exchange for shares of common stock, cash or other property with
a value based on the excess of the fair market value of the
shares subject to the option over the aggregate exercise price
of the option, or (3) cancel the option after providing the
holder of the option with an opportunity to exercise the option
to the extent vested within a specified period prior to the date
of the change of control. With respect to other stock incentive
agreements, if a change of control occurs, then, except to the
extent otherwise provided in the related award agreement or as
otherwise provided in the plan, each award will be governed by
applicable law and the documents effectuating the change of
control.
Assignability. In general, awards granted
under the plan may not be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated by a participant other
than by will or the laws of descent and distribution, and during
the lifetime of a participant, any award may be exercisable only
by him, or in the case of a participant who is mentally
incapacitated, by his guardian or legal representative. The
committee may prescribe and include in applicable award
agreements other restrictions on transfer, and may allow limited
transfers to entities controlled by the participant or his or
her family.
Adjustments. In the event of a corporate
transaction involving us (such as split, recapitalization,
extraordinary distribution, merger, consolidation, combination
or exchange of shares of common stock or similar change), or
upon the occurrence of any other event that the committee, in
its sole discretion, deems appropriate, the committee shall
adjust: (1) the number of shares of common stock reserved
under the plan and covered by outstanding awards; (2) the
exercise price in respect of such awards; (3) the
appropriate fair market value and other price determinations for
such awards, and (4) the per person award limitations
described above. Outside of a corporate transaction context, no
award under the plan may be repriced, replaced, regranted or
modified without shareholder approval if the effect would be to
reduce the exercise price for the shares underlying the award.
47
The foregoing description of the plan is qualified by reference
to the terms of the plan. A copy of the plan to be effective
upon stockholder approval is attached hereto as Annex A.
The plan is incorporated by reference in this proxy statement.
U.S. Federal
Income Tax Consequences
Set forth below is a brief summary of the U.S. federal
income tax consequences of awards under the plan. This summary
is not a complete description of the applicable tax
consequences, and it is subject to any changes in applicable tax
rules. This summary assumes that all awards will be exempt from,
or comply with, Section 409A of the Internal Revenue Code
regarding nonqualified deferred compensation. If an award
constitutes nonqualified deferred compensation and fails to
comply with Section 409A, the award will be subject to
immediate taxation and tax penalties in the year the award is
deemed to have vested under Section 409A.
Nonqualified Stock Options. Nonqualified stock
options granted under the plan will generally not be taxable to
a recipient at the time of grant if the exercise price under the
option is not less than the fair market value of the underlying
shares of common stock on the grant date of the option and the
option otherwise complies with Section 409A of the Internal
Revenue Code. Upon the exercise of a nonqualified stock option,
the amount by which the fair market value of the shares of
common stock received, determined as of the date of exercise,
exceeds the exercise price will be treated as taxable income to
the recipient of the option in the year of exercise. Generally,
we will be entitled to a deduction for compensation paid in the
same amount treated as compensation received by the recipient of
the option.
Incentive Stock Options. A recipient of an
incentive stock option under the plan will not generally
recognize any taxable income for U.S. federal income tax
purposes upon receipt of an incentive stock option or,
generally, at the time of exercise of an incentive stock option,
except possibly under the alternative minimum income tax rules.
If the recipient exercises an incentive stock option and does
not dispose of the shares received in a subsequent
disqualifying disposition (generally, a sale, gift
or other transfer within two years after the date of grant of
the stock option or within one year after the shares are
transferred to the recipient of the option), the recipient
receives long-term capital gains treatment on the difference
between the price for which the recipient of the incentive stock
option sells the shares of common stock and his or her tax basis
in the shares (generally, the amount paid upon exercise of the
options). In the event of a disqualifying disposition, the
difference between the fair market value of the shares of common
stock received on the date of exercise and the exercise price
will generally be taxable as compensation income in the year of
disposition, with any excess gain generally being treated as
short- or long-term capital gain. We would not be entitled to a
deduction with respect to shares received by a recipient of an
incentive stock option upon exercise if the common stock
received is not disposed of in a disqualifying disposition. If,
however, an amount is taxable as compensation income to the
recipient of an incentive stock option due to a disqualifying
disposition, we would be entitled to a corresponding deduction
in the same amount for compensation paid.
Restricted Stock Awards. Generally, absent a
Section 83(b) election described below, a grant under the
plan of shares of our common stock that are subject to vesting
and transfer restrictions will not result in taxable income to
the recipient for U.S. federal income tax purposes or a tax
deduction to us in the year of the grant. Instead, the fair
market value of the shares less any amount paid for such shares
will generally be taxable to the recipient as taxable income in
the year in which the restrictions on the shares lapse. Any
recipient, however, may elect pursuant to Section 83(b) of
the Internal Revenue Code to treat the fair market value of the
shares on the date of the grant less any amount paid for such
shares as taxable income in the year of the grant, provided the
recipient makes the Section 83(b) election within
30 days after the date of the grant. In any case, we would
receive a deduction for U.S. federal income tax purposes
corresponding in amount to the amount of compensation included
in the recipients income in the year in which that amount
is so included.
Unrestricted Stock Awards. A grant of shares
of our common stock or a cash equivalent that is not subject to
vesting restrictions will result in taxable income for
U.S. federal income tax purposes to the recipient at the
time of grant in an amount equal to the fair market value of the
shares or the amount of cash awarded. Subject to
Section 162(m) of the Internal Revenue Code, we would be
entitled to a corresponding deduction at that time for the
amount included in the recipients income.
48
Cash Awards. Cash awards are taxable income to
the recipient for U.S. federal income tax purposes at the
time of payment. The recipient will have taxable income equal to
the amount of cash paid, and, subject to Section 162(m) of
the Internal Revenue Code, we would have a corresponding
deduction for U.S. federal income tax purposes.
Phantom Stock, Restricted Stock Units and Stock Appreciation
Rights. Generally, a recipient will not recognize
any taxable income for U.S. federal income tax purposes
upon the grant of the phantom stock, restricted stock units or
stock appreciation rights. The amount of cash paid (before
applicable tax withholdings) or the then-current fair market
value of the shares of common stock received upon settlement of
the phantom stock or restricted stock units is taxable to the
recipient as compensation income. Upon exercise of a stock
appreciation right, the amount of any cash received (before
applicable tax withholdings) and the fair market value as of the
exercise date of any shares of common stock received are taxable
to the recipient as compensation income. Generally, subject to
Section 162(m) of the Internal Revenue Code, we would be
entitled to a deduction for the same amount treated as
compensation income taxable to the recipient upon the settlement
of phantom stock or restricted stock units or the exercise of
stock appreciation rights.
Deductibility of Awards. Section 162(m)
of the Internal Revenue Code provides that certain compensation
received in any year by a covered employee in excess
of $1 million is non-deductible by us for U.S. federal
income tax purposes. Section 162(m) provides an exception,
however, for performance-based compensation. The
compensation committee may determine to designate awards granted
to covered employees as performance-based
compensation. However, the committee may award compensation that
is or may become non-deductible.
Deferred Compensation. Any deferrals made
under the plan, including awards granted under the plan that are
considered to be deferred compensation (such as phantom stock,
restricted stock units or stock appreciation rights) must
satisfy certain requirements in order to be exempt from, or to
comply with, Section 409A of the Internal Revenue Code so
as to avoid adverse tax consequences to participating
recipients. These include requirements on the timing of payments
and distributions. We intend to structure any deferrals and all
awards under the plan to be exempt from or to meet the
applicable tax law requirements.
409A Exemption and Compliance. It is the
intent of the Company that the provisions of the plan and any
award agreement entered into pursuant to the plan comply with
or, as applicable, be exempt from, Code Section 409A and
related regulations and Treasury pronouncements. The plan and
any award agreements shall be continued and administered in
accordance with this intention.
Other Tax Consequences. State tax consequences
may in some cases differ from those described above. In
addition, awards made under the plan may be made to persons who
are subject to tax in jurisdictions other than the United States
and may result in tax consequences differing from those
described above.
Plan
Benefits
Any future awards granted to non-employee directors, executive
officers and non-executive officer employees under the plan are
subject to the discretion of the committee and, therefore, are
not determinable at this time, except as described in the table
below, which represents the number of shares potentially
issuable under the performance grant approved by the
compensation committee, subject to stockholder approval of the
amended and restated plan.
On March 6, 2011, annual equity grants were made to each of
Messrs. Rynd, Noe, Butz, Carr, and Carson and
Ms. Rodriguez. Each of the executive officers received
restricted stock awards, which vest
1/3
per year and have no performance criteria, and a performance
grant, which vests
1/3
per year, but only if the company achieves performance
objectives with respect to two metrics in 2011. Threshold,
target and stretch performance objectives have been established
for each metric, with the officer vesting 33% more shares at the
stretch level, 33% less shares at the threshold level, with
vesting pro rated between levels. No shares will be issued with
respect to a particular metric if the threshold performance
objective is not met with respect to such metric. At the target
level, the restricted stock awards and the performance grant are
44% and 56%, respectively, of the total target grant. Additional
information is provided on page 28.
49
The maximum number of shares potentially issuable to each of the
executive officers under the amended and restated plan if all
objectives are achieved at the maximum level for the performance
grants with respect to each metric is as set forth below:
New Plan
Benefits
Amended
and Restated Hercules Offshore 2004 Long-Term Incentive
Plan
|
|
|
|
|
|
|
|
|
Dollar value
|
|
Number of
|
Name and position
|
|
($)(3)
|
|
shares(4)
|
|
John T. Rynd
|
|
|
|
|
150,000
|
|
Chief Executive Officer and President
|
|
|
|
|
|
|
Stephen M. Butz(1)
|
|
|
|
|
50,000
|
|
Senior Vice President, Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
James W. Noe
|
|
|
|
|
50,000
|
|
Senior Vice President, General Counsel and Chief Compliance
Officer
|
|
|
|
|
|
|
Terrell L. Carr
|
|
|
|
|
50,000
|
|
Vice President, Worldwide Operations (Drilling)
|
|
|
|
|
|
|
Troy L. Carson
|
|
|
|
|
|
|
Chief Accounting Officer
|
|
|
|
|
|
|
Lisa W. Rodriguez(2)
|
|
|
|
|
|
|
Vice President, Human Resources
|
|
|
|
|
|
|
Executive Group
|
|
|
|
|
300,000
|
|
Non-Executive Director Group
|
|
|
|
|
|
|
Non-Executive Officer Employee Group
|
|
|
|
|
|
|
|
|
|
(1) |
|
Mr. Butz became our Senior Vice President, Chief Financial
Officer and Treasurer in May 2010 after serving as our Vice
President, Finance and Treasurer. |
|
(2) |
|
Ms. Rodriguez resigned as Senior Vice President and Chief
Financial Officer in May 2010 and was appointed Vice President,
Human Resources. |
|
(3) |
|
No basis exists to determine the actual number of shares that
may be issuable with respect to these performance grants or the
value of these grants, as they are subject to performance
results that are not yet available, and the number of shares
potentially issuable may be zero if performance criteria are not
met. Therefore, the maximum number of shares that may be
issuable, subject to stockholder approval of the amended and
restated plan, is provided in the table with respect to
performance grants approved on March 6, 2011. |
|
(4) |
|
The grants to the named executive officers on March 6,
2011, including shares granted pursuant to the Companys
existing 2004 Long-Term Incentive Plan, are described in the
table on page . The performance grants shown
above are subject to stockholder approval of the amended and
restated plan. |
Equity
Compensation Plan Information
The following table sets forth information about our common
stock that may be issued under all existing equity compensation
plans as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Securities to be
|
|
Weighted Average
|
|
|
|
|
Issued upon
|
|
Exercise Price of
|
|
|
|
|
Exercise of
|
|
Outstanding
|
|
Number of Securities
|
|
|
Outstanding Options,
|
|
Options, Warrants
|
|
Remaining Available
|
Plan Category
|
|
Warrants and Rights
|
|
and Rights
|
|
for Future Issuance
|
|
Equity compensation plans approved by security holders(1)
|
|
|
5,599,972
|
|
|
$
|
9.48
|
|
|
|
2,435,345
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,599,972
|
|
|
$
|
9.48
|
|
|
|
2,435,345
|
|
|
|
|
(1) |
|
Consists of securities under the amended and restated Hercules
Offshore 2004 Long-Term Incentive Plan. |
50
RATIFICATION
OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Item 5 on Proxy Card)
Our audit committee has appointed Ernst & Young LLP as
our independent registered public accounting firm for the year
ending December 31, 2011. Although the selection and
appointment of an independent registered public accounting firm
is not required to be submitted to a vote of stockholders, the
board of directors has decided to ask our stockholders to ratify
this appointment. Our board recommends that stockholders vote
FOR the ratification of the appointment of Ernst &
Young LLP as our independent registered public accounting firm
for the year ending December 31, 2011.
Representatives of Ernst & Young LLP are expected to
be present at the annual meeting, will be given the opportunity
to make a statement if they so desire, and are expected to be
available to respond to appropriate questions of any
stockholders.
Fees Paid
to Independent Registered Public Accounting Firm
The following tables set forth the fees for professional audit
services rendered by Ernst & Young LLP for the audit
of our annual financial statements for the years ended
December 31, 2010 and 2009, respectively, and the fees
billed for other services rendered by Ernst & Young
LLP, respectively, during those periods.
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(In thousands)
|
|
|
Audit Fees(1)
|
|
$
|
1,508.1
|
|
|
$
|
1,810.7
|
|
Audit-Related Fees(2)
|
|
|
30.0
|
|
|
|
|
|
Tax Fees(3)
|
|
|
312.5
|
|
|
|
249.1
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,850.6
|
|
|
$
|
2,059.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Audit Fees consisted of fees for audit services, which related
to the consolidated audit, quarterly reviews, statutory audits,
comfort letters, accounting consultations, subsidiary audits and
related matters. |
|
(2) |
|
Audit-Related Fees consisted of fees for consultation related to
technical accounting issues and other matters. |
|
(3) |
|
Tax Fees consisted of fees for tax services, which related to
services for tax compliance, tax planning, tax advice (including
tax return preparation) and refund claims and assistance with
tax audits and appeals. |
Pre-approval
Policies and Procedures
The audit committee has established a policy requiring audit
committee pre-approval of all audit, review or attest
engagements, internal control-related services and permissible
nonaudit services, including the fees and terms thereof, to be
performed by the independent registered public accounting firm,
subject to, and in compliance with, the de minimis exception for
nonaudit services described in applicable provisions of the
Securities Exchange Act of 1934 and applicable SEC rules. All
services provided by our independent registered public
accounting firm since November 2005 were pre-approved by the
audit committee.
51
REPORT OF
THE AUDIT COMMITTEE
To the Stockholders of
Hercules Offshore, Inc.:
The board of directors of Hercules Offshore, Inc. maintains an
audit committee currently composed of three nonmanagement
directors, Ms. Baer, and Messrs. Madonna (Chair) and
Parker. The board of directors has determined that the audit
committees current membership satisfies the rules of the
SEC and the NASDAQ Global Select Market that govern audit
committees, including the requirements for audit committee
member independence set out in the NASDAQ Marketplace Rules and
Rule 10A-3
under the Securities Exchange Act of 1934.
In fulfilling its oversight responsibilities, the audit
committee reviewed and discussed the audited financial
statements with management of Hercules Offshore.
The audit committee reviewed and discussed with Hercules
Offshores independent registered public accounting firm
all communications required by generally accepted auditing
standards, including those required by Statement on Auditing
Standards No. 61, as amended, as adopted by the Public
Company Accounting Oversight Board in Rule 3200T.
The audit committee has received the written disclosures and the
letter from the independent registered public accounting firm
required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent
accountants communications with the audit committee
concerning independence, and has discussed with such firm its
independence.
The audit committee discussed with the independent registered
public accounting firm the overall scope and plans for their
audit. The audit committee has met with the independent
registered public accounting firm, with and without management
present, to discuss the results of their examination, their
evaluation of Hercules Offshores internal controls and the
overall quality of Hercules Offshores financial reporting.
The audit committee met six times in 2010.
In reliance on the reviews and discussions referred to above,
and such other matters deemed relevant and appropriate by the
audit committee, the audit committee recommended to the board of
directors (and the board of directors has approved) that the
audited financial statements be included in Hercules
Offshores annual report on
Form 10-K
for the year ended December 31, 2010 for filing with the
SEC. The audit committee also determined that the provision of
services other than audit services rendered by Ernst &
Young LLP was compatible with maintaining Ernst &
Young LLPs independence.
AUDIT COMMITTEE
F. Gardner Parker
Suzanne V. Baer
Thomas J. Madonna, Chairman
March 7, 2011
52
RELATED
PARTY TRANSACTIONS, STOCKHOLDER PROPOSALS AND OTHER
MATTERS
Certain
Relationships and Related Party Transactions
We require that all transactions with related persons (as
contemplated by Item 404 of
Regulation S-K)
be approved by the audit committee of the board of directors, in
compliance with the charter of that committee and with our
Policy Regarding Covered Transactions with Related Persons. In
approving a transaction with a related person, the audit
committee will consider, among others, the following factors:
(1) whether terms or conditions of the transaction are
generally available to third parties; (2) the related
persons relationship to us; (3) whether the
transaction is in the ordinary course of business; and
(4) the impact on a directors independence in the
event the related person is a director, an immediate family
member of a director, or an entity in which a director has a
relationship. For purposes of Item 404 of
Regulation S-K,
the committee determined that no related persons had a material
interest in any of the transactions that it reviewed in the past
year. However, pursuant to our Policy Regarding Covered
Transactions with Related Persons, the committee determined to
monitor and have management provide reports on transactions with
Lime Rocks portfolio companies, even though the committee
determined that our director who is a senior advisor of Lime
Rock does not have a material interest in such transactions
under Item 404 of
Regulation S-K.
Our Code of Business Conduct and Ethics and our Corporate
Governance Guidelines prohibit actual or apparent conflicts of
interest between the interest of any of our directors or
officers, on the one hand, and our company or our stockholders,
on the other hand. The guidelines require that any actual or
apparent conflict of interest be reported to the chairman of the
audit committee for evaluation. The audit committee, with the
assistance of our general counsel, is responsible for evaluating
conflicts of interest.
We entered into a registration rights agreement with the members
of our company at the time of our conversion to a Delaware
corporation. Under the agreement, holders of at least 25% of the
registrable securities subject to the agreement may require us
to file a registration statement under the Securities Act of
1933 to register the sale of shares of our common stock, subject
to certain limitations, including that the reasonably
anticipated gross proceeds must be at least $15.0 million.
These stockholders may request a total of three of these
demand registrations and only one in any six-month
period. These holders also have the right to cause us to
register their registrable securities on
Form S-3
if the reasonably anticipated gross proceeds would be at least
$10.0 million. In addition, if we propose to register
securities under the Securities Act, then the holders who are
party to the agreement will have piggy-back
registration rights, subject to quantity limitations determined
by underwriters if the offering involves an underwriting, to
request that we register their registrable securities. There is
no limit to the number of these piggy-back
registrations in which these holders may request their shares be
included. We generally will bear the registration expenses
incurred in connection with registrations. We have agreed to
indemnify these stockholders against certain liabilities,
including liabilities under the Securities Act, in connection
with any registration effected under the agreement. These
registration rights will terminate at the earlier of
(a) seven years from the closing date of our initial public
offering or (b) with respect to any holder, the date that
all registrable securities held by that holder may be sold in a
three-month period without registration under Rule 144 of
the Securities Act and those registrable securities then
represent less than one percent of all outstanding shares of our
capital stock.
Stockholder
Proposals for the 2012 Annual Meeting
Rule l4a-8
under the Securities Exchange Act of 1934 addresses when a
company must include a stockholders proposal in its proxy
statement and identify the proposal in its form of proxy when
the company holds an annual or special meeting of stockholders.
Under Rule
l4a-8,
proposals that stockholders intend to have included in our proxy
statement for the 2012 annual meeting of stockholders should be
received by our corporate secretary no later than
November 24, 2011.
If a stockholder desires to bring a matter before our annual
meeting and the matter is submitted outside the process of
Rule 14a-8,
including with respect to nominations for election as directors,
the stockholder must follow the procedures set forth in our
bylaws. Our bylaws provide generally that stockholder proposals
and director nominations to be considered at an annual meeting
may be made by a stockholder only if (1) the stockholder is
a stockholder of record and is entitled to vote at the meeting,
and (2) the stockholder gives timely written notice of the
53
matter to our corporate secretary. To be timely, a
stockholders notice must be delivered to, or mailed and
received at, our principal executive offices not less than
90 days nor more than 120 days prior to the first
annual anniversary of the prior years annual meeting of
stockholders. However, if the date of the annual meeting of
stockholders is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date, notice by the
stockholder must be so delivered not earlier than the close of
business on the 120th day prior to such annual meeting of
stockholders and not later than the close of business on the
later of the 90th day prior to such annual meeting or the
tenth day following the day on which we first publicly announce
the date of such meeting. Under our bylaws, notice with respect
to the 2012 annual meeting of stockholders must be received by
our corporate secretary no earlier than January 10, 2012
and no later than February 9, 2012. The notice must set
forth the information required by the provisions of our bylaws
dealing with stockholder proposals and nominations of directors.
All notices should be directed to: Corporate Secretary, Hercules
Offshore, Inc., 9 Greenway Plaza, Suite 2200, Houston,
Texas 77046, Attention: Stockholder Notices. Under current SEC
rules, we are not required to include in our proxy statement any
director nominated by a stockholder using this process. If we
choose not to include such a nominee, the stockholder will be
required to distribute its own proxy materials in connection
with its solicitation of proxies with respect to that nominee.
Discretionary
Voting of Proxies on Other Matters
Management does not intend to bring before the annual meeting
any matters other than those disclosed in the notice of annual
meeting of stockholders attached to this proxy statement, and it
does not know of any business that persons other than management
intend to present at the meeting. If any other matters are
properly presented at the annual meeting for action, the persons
named in the enclosed form of proxy and acting thereunder
generally will have discretion to vote on those matters in
accordance with their best judgment.
Householding
The SEC permits a single set of notices, annual reports and
proxy statements to be sent to any household at which two or
more stockholders reside if they appear to be members of the
same family. Each stockholder continues to receive a separate
proxy card. This procedure, referred to as householding, reduces
the volume of duplicate information stockholders receive and
reduces mailing and printing expenses. A number of brokerage
firms have instituted householding.
As a result, if you hold your shares through a broker and you
reside at an address at which two or more stockholders reside,
you will likely be receiving only one notice, annual report and
proxy statement unless any stockholder at that address has given
the broker contrary instructions. However, if any beneficial
stockholder residing at an address of which two or more
stockholders reside wishes to receive a separate notice, annual
report or proxy statement in the future, or if any beneficial
stockholder that elected to continue to receive separate notice,
annual reports or proxy statements wishes to receive a single
notice, annual report or proxy statement in the future, that
stockholder should contact his or her broker or send a request
to our corporate secretary at our principal executive offices, 9
Greenway Plaza, Suite 2200, Houston, Texas 77046, telephone
number
(713) 350-5100.
We will deliver, promptly upon written or oral request to the
corporate secretary, a separate copy of the notice, 2010 annual
report and this proxy statement to a beneficial stockholder at a
shared address to which a single copy of the documents was
delivered.
Solicitation
of Proxies
We will bear the cost of the solicitation of proxies, including
the cost of preparing, printing and mailing the materials used
in the solicitation. We have retained Phoenix Advisory Partners,
LLC to aid in the solicitation of proxies for a fee of $7,000
and the reimbursement of
out-of-pocket
expenses. Proxies may also be solicited by personal interview,
telephone and telegram, and via the Internet by our directors,
officers and employees, who will not receive additional
compensation for those services. Arrangements also may be made
with brokerage houses and other custodians, nominees and
fiduciaries for the forwarding of solicitation materials to the
beneficial owners of shares held by those persons, and we will
reimburse them for reasonable expenses incurred by them in
connection with the forwarding of solicitation materials.
54
Additional
Information About Hercules Offshore
You can learn more about Hercules Offshore and our operations by
visiting our website at www.herculesoffshore.com.
Among other information we have provided there, you will find:
|
|
|
|
|
our certificate of incorporation and bylaws;
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the charters of each of our standing committees of the board;
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our corporate governance guidelines;
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our code of business conduct and ethics;
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our ethics manual;
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our policy regarding covered transactions with related persons;
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our policy regarding the granting of equity-based compensation
awards;
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our policy regarding director recommendations by stockholders;
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our director and executive equity ownership guidelines;
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information concerning our business and recent news releases and
filings with the SEC; and
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information concerning our management and board of directors.
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For additional information about our company, please refer to
our 2010 annual report, which is available with our proxy
statement at the following address on the Internet:
http://www.proxydocs.com/hero.
HERCULES OFFSHORE, INC.
John
T. Rynd
Chief Executive Officer and President
Houston, Texas
March 25, 2011
55
Appendix A
HERCULES
OFFSHORE
2004 LONG-TERM INCENTIVE PLAN
Amended
and Restated Effective March 22, 2011
1. Objectives. This Hercules Offshore
2004 Long-Term Incentive Plan (this Plan) is
intended as an incentive to retain and attract persons of
training, experience and ability to serve as employees,
consultants and directors of Hercules Offshore, Inc., a Delaware
corporation, and its successors, to encourage the sense of
proprietorship of such persons and to stimulate the active
interest of such persons in the development and financial
success of the Company and its Subsidiaries and to provide for
the assumption, continuation and fulfillment upon exercise of
the Assumed Options and the Assumed Deferred Units pursuant to
the Merger Agreement (as those terms are defined below).
2. Definitions. As used herein, the terms
set forth below shall have the following respective meanings:
Act means the Securities Act of 1933, as
amended from time to time.
Assumed Deferred Units means the Deferred
Units, as defined in the Merger Agreement, granted in 2007 to
holders other than Non-Continuing Employees, as defined in the
Merger Agreement, assumed by the Company pursuant to
Section 2.4(c)(v)(B) of the Merger Agreement.
Assumed Options means TODCO Options that
become Assumed Options pursuant to, and as that term
is defined in, the Merger Agreement.
Award means any Option, Restricted Stock,
Performance Award, Phantom Stock, Stock Appreciation Right, Cash
Award or Stock Award, whether granted singly, in combination or
in tandem, granted to a Participant pursuant to any applicable
terms, conditions and limitations as the Committee may establish
in order to fulfill the objectives of this Plan. The term
Award shall also mean an Assumed Option and an
Assumed Deferred Unit, unless the context in which it is used
indicates that a reference to Assumed Options or Assumed
Deferred Units is not intended.
Award Agreement means a written agreement
between the Company and a Participant that sets forth the terms,
conditions and limitations applicable to an Award.
Board means the Board of Directors of the
Company.
Cash Award means an Award payable in cash.
Change of Control means (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.
Code means the United States Internal Revenue
Code of 1986, as amended from time to time.
Committee means the Compensation Committee of
the Board or such other committee of the Board as is designated
by the Board to administer this Plan, or in the absence of any
such designation, the Board.
Common Stock means the common stock of the
Company.
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Company means Hercules Offshore, Inc.
Consultant means an individual, other than a
Director or an Employee, who renders consulting services or
advisory services to the Company or a Subsidiary, provided such
services are not in connection with the offer or sale of
securities in a capital-raising transaction.
Director means a member of the Board of
Directors of the Company who is not an Employee or a Consultant
of the Company or a Subsidiary.
Effective Date means the date of this
amendment and restatement of the Plan is approved by the Board,
subject to Section 24.
Effective Time of the Merger shall have the
same meaning as the term Effective Time as defined
in the Merger Agreement.
Employee means an individual employed by the
Company or a Subsidiary. For purposes of this Plan, an Employee
also includes a consultant providing services to the Company or
a Subsidiary.
Exercise Price means, in the case of Option
Shares, the price at which the Option Shares may be purchased
under the terms of an Award Agreement and in the case of Stock
Appreciation Rights, the base value from which appreciation of
shares of Common Stock is measured for purposes of determining
the amount payable upon the exercise
and/or
settlement of such Stock Appreciation Right.
Exchange Act means the Securities Exchange
Act of 1934, as amended from time to time.
Fair Market Value of a share of Common Stock,
as of a particular date, is equal to (a) if shares of
Common Stock are listed on a national securities exchange, the
closing price per share of Common Stock on the consolidated
transaction reporting system for the principal national
securities exchange on which shares of Common Stock are listed
on that date or, if there has been no such sale so reported on
that date, on the last preceding date on which such a sale was
so reported; or (b) if (a) is not applicable, then
such amount as may be determined by the Committee or the Board
by the reasonable application of a reasonable valuation
methodology taking into consideration in applying its
methodology all available information material to the value of
the Company.
Grant Date means the date on which an Award
is granted by the Committee; provided, however, that in the case
of Options and Stock Appreciation Rights, Grant Date
shall have the same meaning as the terms date of
grant and similar terminology in the regulations
promulgated under Code Section 409A.
Insider means an individual who is, on the
relevant date, an officer, director or ten percent (10%)
beneficial owner of any class of the Companys equity
securities that is registered pursuant to Section 13 of the
Exchange Act, all as defined under Section 16 of the
Exchange Act.
ISO means an incentive stock option within
the meaning of Code Section 422.
Merger Agreement means the Amended and
Restated Agreement and Plan of Merger By and Among Hercules
Offshore, Inc., TODCO, and THE Hercules Offshore Drilling
Company LLC, Effective as of March 18, 2007.
Non-Continuing Employees shall have
the same meaning as provided in the Merger Agreement.
Option means a right to purchase a particular
number of shares of Common Stock at a particular Exercise Price,
subject to certain terms and conditions as provided in this Plan
and an Award Agreement. An Option may be in the form of an ISO
or a nonqualified stock option within the meaning of Code
Section 83.
Option Shares means the shares of Common
Stock covered by a particular Option.
Outside Director means a Director who is not
an Employee and who qualifies as:
(a) a non-employee director under
Rule 16b-3(b)(3)
under the Exchange Act, and
(b) an outside director under Code
Section 162(m) and the regulations promulgated thereunder.
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Participant means an Employee, Director or
Consultant to whom an Award has been granted and is outstanding
under this Plan. The term Participant shall also
mean a former employee or director of TODCO who holds an
outstanding and unexercised Assumed Option that is subject to
the terms of this Plan.
Performance-Based Exception means the
performance-based exception from the tax deductibility
limitations of Code Section 162(m).
Performance Award means an Award that is
contingent on the achievement of certain performance objectives
established by the Committee pursuant to the terms of
Section 6(c).
Phantom Stock means a right to receive
payment, in cash or shares of Common Stock, equal to or less
than the Fair Market Value of a specified number of shares of
Common Stock.
Plan means the Hercules Offshore 2004
Long-Term Incentive Plan, as amended from time to time.
Restricted Stock means shares of Common Stock
that are restricted or subject to forfeiture provisions.
Rule 16b-3
means
Rule 16b-3
promulgated under the Exchange Act or any successor rule.
Stock Appreciation Right or
SAR means a right to receive a payment, in
cash or shares of Common Stock, equal to the excess of the Fair
Market Value (or a lesser value as provided in the Award
Agreement) of a specified number of shares of Common Stock on
the date the right is exercised over the Exercise Price of the
Stock Appreciation Right.
Stock Award means an Award payable in shares
of Common Stock, which may be Restricted Stock.
Subsidiary means (a) with respect to any
Awards other than ISOs, and as otherwise used in this Plan,
(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), and (b) with
respect to Awards of ISOs, any subsidiary within the meaning of
Code Section 424(f).
TODCO means TODCO, a Delaware corporation,
during its existence prior to the Effective Time of the Merger.
TODCO Deferred Unit shall mean the Assumed
Deferred Unit, as well as the written award agreement and the
plan provisions incorporated by reference therein granted by
TODCO and evidencing the terms and provisions of the Assumed
Deferred Unit.
TODCO Option shall mean Company Stock
Option, as that term is defined in the Merger Agreement,
as well as the written award agreement and the plan provisions
incorporated by reference therein granted by TODCO and
evidencing the terms and provisions of that TODCO Option.
3. Plan Administration and Designation of
Participants. All Employees of the Company and
its Subsidiaries and all Directors and Consultants are eligible
for Awards under this Plan. The Committee shall select the
Participants from time to time by the grant of Awards under this
Plan and, subject to the terms and conditions of this Plan,
shall determine all terms and conditions of the Awards. This
Plan shall be administered by the Committee, which shall have
full and exclusive power to interpret this Plan and to adopt
such rules, regulations and guidelines for carrying out this
Plan as it may deem necessary or appropriate. Other than any
authority or duty reserved in this Plan exclusively to the Board
or the Committee, the Committee may delegate its duties
hereunder to the Chief Executive Officer or other executive
officers of the Company subject to such rules and regulations as
the Committee establishes. The Committee may, in its discretion,
provide for the extension of the exercisability of an Award,
accelerate the vesting or exercisability of an Award, eliminate
or make less restrictive any restrictions contained in an Award
Agreement, waive any restriction or other provision of this Plan
or an Award Agreement or otherwise amend or modify an Award in
any manner that is either (a) not adverse to the
Participant holding the Award or (b) consented to by such
Participant. Notwithstanding the above, the Board may assume the
powers and
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responsibilities granted to the Committee or other delegate at
any time, in whole or in part; provided, however, that only a
Committee (or a properly constituted and authorized
sub-committee
thereof) comprised solely of two (2) or more Outside
Directors may grant, amend, exercise any discretion over, or
certify the satisfaction or failure to satisfy any performance
goals or the material requirements or conditions with respect to
Awards that will meet the Performance-Based Exception, and only
a Committee comprised solely of Outside Directors may grant
Stock incentives to Insiders that will be exempt from
Section 16(b) of the Exchange Act.
4. Award Agreement. Each Award granted
hereunder shall be described in an Award Agreement, which shall
be subject to the terms and conditions of this Plan and shall be
signed by the Participant and by the appropriate officer for and
on behalf of the Company.
5. Shares of Common Stock Subject to this
Plan. Subject to adjustment as provided in
Section 12 hereof, the total number of shares of Common
Stock that may be issued pursuant to Awards under this Plan,
including the Assumed Options, will not exceed
15,250,000 shares of Common Stock (consisting of 2,450,000
originally authorized in 2005, an additional
1,000,000 shares authorized in 2006, and an additional
6,800,000 shares authorized in 2007 in connection with the
first amendment and restatement of the Plan, and an additional
5,000,000 shares authorized in 2011 in connection with the
second amendment and restatement of the Plan), of which 250,000
may be granted as Incentive Stock Options. All such shares of
Common Stock shall be reserved, to the extent that the Company
deems appropriate, from authorized but unissued shares of Common
Stock, from shares held in the treasury of the Company or from
shares that have been reacquired by the Company.
(a) Except with respect to Assumed Options or the Assumed
Deferred Units, the maximum amount of shares of Common Stock
that may be covered by awards granted to any one individual
pursuant to Section 6 in any calendar year shall be
(i) 300,000 with respect to Stock Awards or Phantom Stock
and (ii) 600,000 with respect to SARs or Options. The
limitations set forth in this Section 5(a) (collectively
referred to as the Stock-Based Award Limitations)
shall not apply to the Assumed Options or the Assumed Deferred
Units.
(b) The maximum payment that can be made for awards granted
to any one individual pursuant to Section 6(e) in respect
of any calendar year shall be $5,000,000.
(c) The Committee and the appropriate officers of the
Company shall from time to time take whatever actions are
necessary to execute, acknowledge, file and deliver any
documents required to be filed with or delivered to any
governmental authority or any stock exchange or transaction
reporting system on which shares of Common Stock are listed or
quoted in order to make shares of Common Stock available for
issuance pursuant to this Plan. Awards that are forfeited or
terminated or expire unexercised in such a manner that all or
some of the shares of Common Stock subject thereto are not
issued to a Participant shall immediately become available for
the granting of Awards under this Plan. The number of shares of
Common Stock available for future Awards under this Plan shall
include shares (i) not delivered or transferred under an
Award that expires or is forfeited, or that is settled in cash,
rather than shares of Common Stock, (ii) that are not
delivered due to the manner of exercise of the Award or are
retained by the Company from the shares subject to the Award in
full or partial satisfaction of the Exercise Price of the Award
or any withholding obligation, (iii) of Restricted Stock
that are forfeited and returned to the Company, and
(iv) received from the Participant in full or partial
satisfaction of the Exercise Price of the Award or any
withholding obligation.
6. Awards to Participants.
(a) Incentive Stock Options. Options
granted to Employees (but not Consultants or Directors)
hereunder may be ISOs. An ISO shall consist of a right to
purchase a specified number of shares of Common Stock at a price
specified by the Committee in the Award Agreement or otherwise,
which shall not be less than the Fair Market Value of the Common
Stock on the Grant Date. Any ISO granted shall expire not later
than ten (10) years after the Grant Date, with the
expiration date to be specified by the Committee in the Award
Agreement. Any ISO granted must, in addition to being subject to
applicable terms, conditions and limitations established by the
Committee, comply with Code Section 422. Pursuant to the
ISO requirements of Code Section 422, notwithstanding
anything herein to the contrary, (i) no ISO can be granted
under this Plan on or after the tenth (10th) anniversary of the
Effective Date (or the fifth anniversary of the Effective Date
if the ISO is awarded to any person who, at the time of grant,
owns stock representing more than 10% of the combined voting
power of all classes of stock of the Company or any Subsidiary),
(ii) no Optionee may be granted an ISO to the extent that,
upon the grant of the ISO, the
A-4
aggregate Fair Market Value (determined as of the date the
Option is granted) of the Common Stock with respect to which
ISOs (including Options hereunder) are exercisable for the first
time by the Optionee during any calendar year (under all plans
of the Company and any Subsidiary) would exceed $100,000, and
(iii) the Exercise Price of the ISO may not be less than
100% of the Fair Market Value of the Common Stock at the time of
grant (or not less than 110% of such Fair Market Value if the
ISO is awarded to any person who, at the time of grant, owns
stock representing more than 10% of the combined voting power of
all classes of stock of the Company or any Subsidiary). All
other terms, conditions and limitations applicable to ISOs shall
be determined by the Committee.
(b) Nonqualified Stock Options. Options
granted to Participants may be nonqualified stock options within
the meaning of Code Section 83. A nonqualified stock option
shall consist of a right to purchase a specified number of
shares of Common Stock at the Exercise Price specified by the
Committee in the Award Agreement, which Exercise Price shall not
be less than the Fair Market Value of the subject shares of
Common Stock on the Grant Date of the Option. The expiration
date of the nonqualified stock option shall be specified by the
Committee in the Award Agreement. All other terms, conditions
and limitations applicable to nonqualified stock options shall
be determined by the Committee.
(c) Stock Award (including Restricted
Stock). An Award may consist of Common Stock or
may be denominated in units of Common Stock. Each Stock Award
awarded shall be subject to such conditions, restrictions, and
contingencies as the Committee shall determine and set forth in
the Award Agreement. The certificates evidencing shares of
Common Stock issued in connection with a Stock Award shall
contain appropriate legends and restrictions describing the
terms and conditions of the restrictions applicable thereto.
(d) Phantom Stock. An Award may be in the
form of Phantom Stock or other bookkeeping account tied to the
value of shares of Common Stock. Each Phantom Stock Award
awarded shall be subject to such conditions, restrictions, and
contingencies as the Committee shall determine and set forth in
the Award Agreement.
(e) Cash Awards. An Award may be in the
form of a Cash Award. Each Cash Award awarded shall be subject
to such conditions, restrictions, and contingencies as the
Committee shall determine and set forth in the Award Agreement
(f) Stock Appreciation Rights. An Award
may be in the form of an SAR. The Exercise Price of an SAR shall
not be less than the Fair Market Value of the Common Stock on
the Grant Date of the SAR. The term of a SAR shall not exceed
ten years from the date of grant. Subject to the foregoing
limitations, the terms, conditions and limitations applicable to
any SARs awarded pursuant to this Plan, including the term of
any SARs and the date or dates upon which they become
exercisable, shall be determined by the Committee.
(g) Performance Awards. Any Option, Stock
Award, Phantom Stock, SAR or Cash Award may be designed as
Performance Awards. Each Performance Award awarded shall be
subject to such conditions, restrictions, and contingencies as
the Committee shall determine and set forth in the Award
Agreement. These may include continuous service with the Company
and/or its
Subsidiaries
and/or the
achievement of performance goals. The performance goals that may
be used by the Committee for such awards shall consist of
revenue, net income, stock price, market share, earnings per
share, other earnings measures, return on equity, return on
assets, costs, shareholder value, EBIT, EBITDA, funds from
operations, cash flow, cash from operations, net cash flow, net
cash flow before financing activities, other cash flow measures,
total shareholder return, return on capital, return on invested
capital, operating income, after-tax operating income,
utilization rates, successful closing of transactions, total
market value and safety and environmental performance measures.
The Committee may designate a single goal criterion or multiple
goal criteria for performance measurement purposes with the
measurement based on absolute Company or business unit
performances
and/or on
performance as compared with that of other publicly-traded
companies. Unless otherwise stated, a performance goal need not
be based upon an increase or positive result under a particular
business criterion and could include, for example, maintaining
the status quo or limiting economic losses (measured, in each
case, by reference to specific business criteria). A Performance
Award may be designed to satisfy the Performance-Based Exception.
7. Payment of Awards.
(a) General. Awards, other than Cash
Awards (which are payable only in cash), may be paid in cash or
Common Stock or combinations thereof and the payment of any
Award may include such restrictions as the
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Committee shall determine, including, in the case of Common
Stock, restrictions on transfer and forfeiture provisions.
(b) Deferral. The Committee may, in its
discretion, (i) permit selected Participants to elect to
defer payments of some or all types of Awards in accordance with
procedures established by the Committee or (ii) provide for
the deferral of an Award in an Award Agreement or otherwise. Any
such deferral may be in the form of installment payments or a
future lump-sum payment. Any deferred payment, whether elected
by the Participant or specified by the Award Agreement or by the
Committee, may be forfeited if and to the extent that the Award
Agreement so provides.
(c) Dividends and Interest. Distributions
or dividends or dividend equivalent rights may be extended to
and made part of any Award denominated in Common Stock or units
of Common Stock, subject to such terms, conditions and
restrictions as the Committee may establish. The Committee may
also establish rules and procedures for the crediting of
interest on cash payments and dividend equivalents for Awards
denominated in Common Stock or units of Common Stock.
(d) Substitution of Awards. At the
discretion of the Committee, a Participant may be offered an
election to substitute an Award for another Award or Awards of
the same or different type. Except in connection with a
corporate transaction involving the Company (including, without
limitation, any stock dividend, stock split, extraordinary cash
dividend, recapitalization, reorganization, merger,
consolidation,
split-up,
spin-off, combination, or exchange of shares) that results in an
adjustment pursuant to Section 14(b), the terms of
outstanding Awards may not be amended to reduce the Exercise
Price of outstanding Options or SARs or cancel outstanding
Options or SARS in exchange for cash, other Awards or Options or
SARs with an Exercise Price that is less than the Exercise Price
of the original Options or SARs without stockholder approval.
8. Stock Option Exercise. The price at which shares
of Common Stock may be purchased under an Option shall be paid
in full at the time of exercise in cash or, if permitted by the
Committee, by means of tendering Common Stock or surrendering
all or part of that or any other Award that has been held by the
Participant for at least six (6) months and that is valued
at Fair Market Value on the date of exercise, or any combination
thereof. The Committee shall determine acceptable methods for
tendering Common Stock or Awards to exercise an Option as it
deems appropriate. The Committee may provide for procedures to
permit the exercise or purchase of Awards by use of the proceeds
to be received from the sale of Common Stock issuable pursuant
to an Award through a broker-assisted cashless
exercise procedure.
9. Change of Control of the Company.
(a) General Rule for Options. Except as
otherwise provided in an Award Agreement, if a Change of Control
occurs and the agreements effectuating the Change of Control do
not provide for the assumption or substitution of all Options
granted under this Plan, then with respect to any Option that is
not so assumed or substituted (a Non-Assumed
Option), in the event of a Change of Control, the
Committee, in its sole and absolute discretion, may (but shall
not be required to) take any or all of the following actions to
be effective as of the Change of Control (or as of any other
date fixed by the Committee occurring within the thirty
(30) day period immediately preceding the date of the
Change of Control, but only if such action remains contingent
upon the effectuation of the Change of Control) (such date
referred to as the Action Effective Date):
(i) accelerate the vesting
and/or
exercisability of such Non-Assumed Option; and/or
(ii) unilaterally cancel such Non-Assumed Option in
exchange for:
A. whole
and/or
fractional shares of Common Stock (or for whole shares and cash
in lieu of any fractional share) or whole
and/or
fractional shares of a successor (or for whole shares of a
successor and cash in lieu of any fractional share) that, in the
aggregate, are equal in value to the excess of the Fair Market
Value of the Option Shares subject to such Non-Assumed Option
determined as of the Action Effective Date (taking into account
vesting) over the aggregate Exercise Price for such Option
Shares; or
B. cash or other property equal in value to the excess of
the Fair Market Value of the Option Shares subject to such
Non-Assumed Option determined as of the Action Effective Date
(taking into account vesting) over the aggregate Exercise Price
for such Option Shares; and/or
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(iii) unilaterally cancel such Non-Assumed Option after
providing the holder of such Non-Assumed Option with:
A. an opportunity to exercise such Non-Assumed Option to
the extent vested within a specified period prior to the date of
the Change of Control, and
B. notice of such opportunity to exercise prior to the
commencement of such specified period.
Notwithstanding the foregoing, to the extent that the recipient
of an Option is an Insider, payment of cash in lieu of whole or
fractional shares of Common Stock or shares of a successor may
only be made to the extent that such payment (1) has met
the requirements of an exemption under
Rule 16b-3
promulgated under the Exchange Act, or (2) is a subsequent
transaction the terms of which were provided for in a
transaction initially meeting the requirements of an exemption
under
Rule 16b-3
promulgated under the Exchange Act. Unless a Stock Award
Agreement provides otherwise, the payment of cash in lieu of
whole or fractional shares of Common Stock or in lieu of whole
or fractional shares of a successor shall be considered a
subsequent transaction approved by the original grant of an
Option.
(b) General Rule for Other Stock Incentive
Agreements. If a Change of Control occurs, then,
except to the extent otherwise provided in the Stock Award
Agreement pertaining to a particular Award or as otherwise
provided in this Plan, each Award shall be governed by
applicable law and the documents effectuating the Change of
Control.
10. Termination of Employment or
Service. Upon the termination of employment or
service by a Participant, any unexercised, deferred or unpaid
Awards shall be treated as provided in the specific Award
Agreement evidencing the Award. Unless otherwise specifically
provided in the Award Agreement, each Award granted pursuant to
this Plan that is an Option may be exercised, to the extent then
vested, no more than three months from the date the
Participants employment or service with the Company or its
Subsidiaries terminates.
11. Assumption of TODCO Options. In
accordance with Section 2.4(c)(iii) of the Merger
Agreement, as of the Effective Time of the Merger and subject to
the requirements, terms and conditions of the Merger Agreement,
the Company assumed the Assumed Options, which were incorporated
into and are administered under this Plan. The Committee granted
new Award Agreements evidencing and containing the terms of the
Assumed Options and replacing the TODCO Options that originally
evidenced such Assumed Options. The new Award Agreements for the
Assumed Options reflect:
(a) that with respect to vesting,
(i) Assumed Options granted by TODCO prior to
February 26, 2007, were fully vested as of the Effective
Time of the Merger;
(ii) Assumed Options (whenever granted by TODCO) held by
Non-Continuing Employees were fully vested as of the Effective
Time of the Merger;
(iii) Assumed Options that were fully vested prior to the
Effective Time of the Merger in accordance with the terms of
their respective TODCO Options are fully vested; and
(iv) Assumed Options not addressed in clauses (i),
(ii) or (iii), above, are subject to a remaining vesting
schedule, conditions and requirements consistent with the terms
of the respective TODCO Options originally evidencing those
Assumed Options;
(b) that the Assumed Options are exercisable for shares of
Common Stock (and not for shares of TODCO common stock), the
number and Exercise Price of which shall be determined as
provided in Section 2.4(c)(iii) of the Merger Agreement;
(c) that the Assumed Options are exercisable (subject to
satisfaction of the vesting requirements in the case of Assumed
Options subject to (a)(iv), above) for the term as provided
under the TODCO Options; and
(d) that the Assumed Options are subject to the terms of
the TODCO Option and such other terms and conditions as the
Committee included in new Award Agreements that provide for,
among other things, the administration of the Assumed Options
under this Plan, so long as those other terms and conditions do
not violate Section 2.4(c)(iii) of the Merger Agreement or
the TODCO Option.
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12. Assumption of TODCO Deferred
Units. Pursuant to Section 2.4(c)(v)(B) of
the Merger Agreement, the Company assumed as of the Effective
Time of the Merger the obligations of TODCO under the award
letters for Assumed Deferred Units granted by TODCO in 2007 to
holders other than Non-Continuing Employees and outstanding
immediately prior to the Effective Time of the Merger. In
accordance with Section 2.4(c)(v)(B) of the Merger
Agreement, the Assumed Deferred Units were converted into,
immediately prior to the Effective Time of the Merger,
restricted shares of TODCO common stock at the rate of 0.5
restricted share per Deferred Unit, which were in turn converted
into restricted shares of Company common stock. In accordance
with the forgoing, the Committee granted shares of Restricted
Stock for the restricted shares of TODCO common stock resulting
from the assumption of the Assumed Deferred Units. Such shares
of Restricted Stock were granted in accordance with the
provisions and requirements of Section 2.4(c)(v)(B) of the
Merger Agreement, the TODCO Deferred Unit and, to the extent not
inconsistent with the foregoing, the provisions of this Plan.
13. Assignability. Except as otherwise
provided herein, no Award granted under this Plan shall be sold,
transferred, pledged, assigned or otherwise alienated or
hypothecated by a Participant other than by will or the laws of
descent and distribution, and during the lifetime of a
Participant, any Award shall be exercisable only by him, or in
the case of a Participant who is mentally incapacitated, the
Award shall be exercisable by his guardian or legal
representative. The Committee may prescribe and include in
applicable Award Agreements other restrictions on transfer. Any
attempted assignment or transfer in violation of this
Section 13 shall be null and void. Upon a
Participants death, the personal representative or other
person entitled to succeed to the rights of the Participant (the
Successor Participant) may exercise such rights. A
Successor Participant must furnish proof satisfactory to the
Company of his or her right to exercise the Award under the
Participants will or under the applicable laws of descent
and distribution.
14. Adjustments.
(a) 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, recapitalization,
reorganizations or other changes in the ownership of the Company
or its business or any merger or consolidation of the Company,
or any issue of bonds, debentures or other obligations, 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 Company act or proceeding of any kind, whether or not of a
character similar to that of the acts or proceedings enumerated
above.
(b) In the event of any Common Stock distribution or split,
recapitalization, extraordinary distribution, merger,
consolidation, combination or exchange of shares of Common Stock
or similar change or upon the occurrence of any other event that
the Committee, in its sole discretion, deems appropriate, the
Committee shall adjust: (i) the number of shares of Common
Stock reserved under this Plan and covered by outstanding
Awards; (ii) the Exercise Price in respect of such Awards;
(iii) the appropriate Fair Market Value and other price
determinations for such Awards and (iv) the Stock-Based
Award Limitations as appropriate.
(c) In the event of a corporate merger, consolidation,
acquisition of property or stock, separation, reorganization or
liquidation that is not a Change of Control, the Committee shall
be authorized (i) to issue or assume Awards by means of
substitution of new Awards, as appropriate, for previously
issued Awards or to assume previously issued Awards as part of
such adjustment or (ii) to cancel Awards that are Options
and give the Participants who are the holders of such Awards
notice and opportunity to exercise for thirty (30) days
prior to such cancellation.
15. Purchase for Investment. Unless the
Awards and shares of Common Stock covered by this Plan have been
registered under the Act, as amended, each person receiving
shares of Common Stock pursuant to an Award under this Plan may
be required by the Company to give a representation in writing
in form and substance satisfactory to the Company to the effect
that he is acquiring such shares for his own account for
investment and not with a view to, or for sale in connection
with, the distribution of such shares or any part thereof.
16. Tax 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 of Common Stock under this Plan, an appropriate amount of
cash or number of shares of Common Stock or a combination
thereof for payment of the minimum amount 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 at the minimum rate required by law.
The Committee may also permit withholding to be satisfied by the
transfer to the Company of shares of Common Stock theretofore
owned by the holder of the Award with
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respect to which withholding is required. If shares of Common
Stock are used to satisfy tax withholding, such shares shall be
valued based on the Fair Market Value when the tax withholding
is required to be made.
17. Amendments or Termination. The
Company may amend, alter or discontinue this Plan, except that
no amendment or alteration that would impair the rights of any
Participant under any Award that he has been granted shall be
made without his consent, and no amendment or alteration shall
be effective prior to approval by the Companys
stockholders to the extent such approval is determined by the
Board to be required by applicable laws, regulations or exchange
requirements.
18. Restrictions. No shares of Common
Stock or other form of payment shall be issued with respect to
any Award unless the Company shall be satisfied based on the
advice of its counsel that such issuance will be in compliance
with applicable federal and state securities laws. The Award
Agreement may include provisions for the repurchase by the
Company of Common Stock acquired pursuant to an Award and
repurchase of the Participants Option rights.
19. Unfunded Plan. This Plan shall be
unfunded. Although bookkeeping accounts may be established with
respect to Participants who are entitled to cash, Common Stock
or rights thereto under this Plan, any such accounts shall be
used merely as a bookkeeping convenience. The Company shall not
be required to segregate any assets that may at any time be
represented by cash, Common Stock or rights thereto, nor shall
this Plan be construed as providing for such segregation, nor
shall the Company, the Board or the Committee be deemed to be a
trustee of any cash, Common Stock or rights thereto to be
granted under this Plan. Any liability or obligation of the
Company to any Participant with respect to a grant of cash,
Common Stock or rights thereto under this Plan shall be based
solely upon any contractual obligations that may be created by
this Plan and any Award Agreement, and no such liability or
obligation of the Company shall be deemed to be secured by any
pledge or other encumbrance on any property of the Company. None
of the Company, the Board or the Committee shall be required to
give any security or bond for the performance of any obligation
that may be created by this Plan.
20. Indemnification. The Company shall
indemnify and hold harmless any member of the Board or any
Committee and other individuals, including Employees and
Directors, performing services on behalf of the Committee,
against any liability, cost or expense arising as a result of
any claim asserted by any person or entity under the laws of any
state or of the United States with respect to any action or
failure to act of such individuals taken in connection with this
Plan, except claims or liabilities arising on account of the
willful misconduct or bad faith of such Board member, committee
member or individual.
21. Rule 16b-3. It
is intended that this Plan and any grant of an Award made to a
person subject to Section 16 of the Exchange Act meet all
of the requirements of
Rule 16b-3.
If any provision of this Plan or any such Awards would
disqualify this Plan or such Award under, or would otherwise not
comply with,
Rule 16b-3,
such provision or Award shall be construed or deemed amended to
conform to
Rule 16b-3.
22. No Guarantee of Employment or Board
Service. The granting of any Award shall not
impose upon the Company any obligation to maintain any
Participant as an Employee or a Director and shall not diminish
the power of the Company to discharge any Participant at any
time.
23. 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, shall be
governed by and construed in accordance with the laws of the
State of Delaware.
24. Effective Date of Plan. This Plan as
amended and restated shall be effective as of the Effective
Date, subject to the approval of this Plan as amended and
restated by the stockholders of the Company within twelve
(12) months of the adoption of this Plan by the Board.
Unless terminated earlier by the Board, this Plan shall
terminate as of the tenth (10th) anniversary of the Effective
Date and no further Awards shall be made after such date.
Termination of this Plan shall not affect Awards made prior to
the termination date.
25. Code Section 409A Compliance. It
is the intent of the Company that the provisions of the Plan and
any Award Agreement comply with or, as applicable, be exempt
from, Code Section 409A and related regulations and
Treasury pronouncements, and this Plan and the Award Agreements
shall be continued and administered in accordance with this
intention.
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HERCULES OFFSHORE, INC.
9 GREENWAY PLAZA, SUITE 2200
HOUSON, TX 77046
ATTN: STEPHEN BUTZ
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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 the day
before the cut-off date or meeting date. 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.
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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.
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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 the day before the cut-off date or meeting
date. Have your proxy card in hand when you call
and then follow the instructions.
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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.
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TO VOTE, MARK BLOCKS BELOW
IN BLUE OR BLACK INK AS FOLLOWS:
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KEEP THIS PORTION FOR YOUR
RECORDS |
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DETACH AND RETURN THIS PORTION
ONLY |
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
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For All |
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Withhold All |
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For All Except |
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To withhold authority to
vote for any individual
nominee(s), mark For All
Except and write the
number(s) of the nominee(s)
on the line below.
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The Board of Directors recommends you vote FOR the following: |
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1. |
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Election of Directors |
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Nominees |
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01 |
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Thomas N. Amonett
02 Thomas J. Madonna
03 F. Gardner Parker |
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The Board of Directors recommends you vote FOR the following proposal:
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Abstain |
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2. |
Advisory vote on 2010 Executive Compensation
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The Board of Directors recommends you vote 1 YEAR on the following proposal:
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2 years |
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3 years |
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Abstain |
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3. |
Advisory vote on the frequency of the stockholder vote on executive compensation. |
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The Board of Directors recommends you vote FOR proposals 4 and 5:
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Abstain |
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4. |
To approve the amended and restated Hercules Offshore 2004 Long-Term Incentive Plan, increasing the number of shares of
Hercules common stock available for issuance under the plan by 5,000,000 shares. |
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5. |
To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for the year ending
December 31, 2011. |
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For address change/comments, mark here. (see
reverse for instructions)
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Please sign exactly as your
name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally.
All holders must sign. If a corporation or partnership, please sign in
full corporate or partnership name, by authorized officer. |
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Signature [PLEASE SIGN WITHIN BOX]
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Signature (Joint Owners) |
Date |
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The
Notice & Proxy Statement and Annual Report is/are available at www.proxyvote.com.
ANNUAL MEETING OF STOCKHOLDERS
HERCULES OFFSHORE, INC.
May 10, 2011
This proxy is solicited by the Board of Directors
The undersigned hereby appoints James W. Noe, Stephen M. Butz, and Troy Carson, and each of them,
proxies of the undersigned, each with full power of substitution, and hereby authorizes them to
represent and to vote, as designated on the reverse side, all the shares of Common Stock of
Hercules Offshore, Inc. held of record by the undersigned on March 14, 2011, at the Annual Meeting
of Stockholders to be held on May 10, 2011 at 8:00 a.m., Houston time, at the Renaissance Hotel, 6
Greenway Plaza East, Houston, Texas, or any adjournment or postponement thereof.
This proxy will be voted in accordance with the instructions specified above and, in the
absence of such specifications, will be voted FOR all director nominees, FOR
Proposals 2, 4 and 5, and 1 YEAR on Proposal 3. If any other business properly comes
before the meeting or any adjournment or postponement thereof, this proxy will be voted
in the discretion of the proxies named herein.
Address change/comments:
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the
reverse side.)
Continued and to be signed on reverse side