On December 20, 2010, the Compensation Committee of the Board of Directors of Hercules
Offshore, Inc. (the Company) approved retention and incentive arrangements for the Companys
Chief Executive Officer, John T. Rynd, consisting of three separate awards.
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. Subject to the satisfaction of all vesting requirements, awards are payable in cash based
on the product of the number of shares of Common Stock specified in the award, the percentage of
that number of shares that vest under the award and the average price of the Common Stock for the
90 days prior to the date of vesting (Average Share Price).
The grant date of each of the three awards is January 1, 2011. 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 a Special Retention Agreement by and between the Company and Mr. Rynd (the
Agreement), 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 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 not exceed $5,000,000.
The second and third awards are Performance Awards under the Companys
2004 Long-term Incentive Plan, as amended in 2007 (the 2004 LTIP).
Each Performance Award provides for a cash payment, subject to vesting, based on 250,000 shares of
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 percentage of the Performance Award vested shall be equal to (1) the Average
Share Price or $10.00, whichever is less, divided by (2) $10.00, and the Average Share Price for
calculating the amount payable under the Performance Award is limited to $10.00. If the
requirements necessary for vesting of a Performance Award are met, the amount payable in cash under
each of the second and third awards shall be not less than $625,000 and not more than $2,500,000.