EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") by and among TODCO, a
Delaware corporation ("TODCO"), TODCO Management Services, LLC., a wholly owned
subsidiary of TODCO (the "Company"), and Xxxxx X. Xxxxxxx (the "Executive"),
dated this 28th day of April, 2003, but effective as of April 21, 2003 (the
"Effective Date").
WHEREAS, TODCO and the Company desire to induce the Executive to enter
into an employment arrangement with TODCO and the Company in order to have the
benefit of the Executive's services from and after the Effective Date and the
Company has agreed to provide compensation and benefits to the Executive in
consideration of the Executive's agreement to become employed by the Company;
and
WHEREAS, the Executive desires to enter into an employment arrangement
with TODCO and the Company and to perform services for the Company and serve as
Vice President Marketing of TODCO for the compensation and benefits described
herein; and
WHEREAS, it is anticipated that TODCO will transfer its deep-water
business to one or more subsidiaries of Transocean Inc. and seek to effect a
registered public offering of common stock of TODCO, in which it is currently
expected that Transocean Inc. and its subsidiaries will be the sole seller of
shares;
NOW, THEREFORE, in consideration of the promises, terms and provisions
set forth herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT PERIOD.
The Company hereby agrees to employ the Executive and the Executive
hereby accepts such employment, subject to the terms and conditions of this
Agreement, for the period commencing on the Effective Date and ending on the
second anniversary of the Effective Date (the "Initial Term"). The Initial Term
(and each subsequent Renewal Term (defined herein)) shall be extended
automatically for an additional one (1)-year period (a "Renewal Term") unless
written notice that this Agreement will not be renewed is given by either party
to the other at least six (6) months prior to the expiration of the Initial Term
or any Renewal Term (collectively, the Initial Term and any Renewal Term shall
be referred to as the "Employment Period").
2. TERMS OF EMPLOYMENT.
(a) Duties. During the Employment Period, the Executive shall
serve in the capacity of Vice President Marketing of TODCO.
During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of
the Company and TODCO and, to the extent necessary to
discharge the responsibilities assigned to the Executive under
this Agreement and reasonable duties, consistent with and
normal for the position, given to the Executive by the Board
of Directors of
TODCO (the "Board") from time to time, to use the Executive's
reasonable best efforts to perform faithfully and efficiently
such responsibilities. During the Employment Period, it shall
not be a violation of this Agreement for the Executive to (i)
serve on corporate, civic or charitable boards or committees,
provided that such service has been approved by the Board,
(ii) deliver lectures or fulfill speaking engagements and
(iii) manage personal investments, so long as all such
activities described in clauses (i), (ii) and (iii) do not
significantly interfere with the performance of the
Executive's responsibilities as the Vice President Marketing
in accordance with this Agreement.
(a) Compensation. The Executive shall be entitled to receive the
compensation set forth below in consideration for his services
during the Employment Period.
(i) Base Salary. The Executive shall receive an annual
base salary ("Annual Base Salary"), of one hundred
eighty five thousand dollars ($185,000), which shall
be paid to the Executive in equal semi-monthly
installments throughout the year, consistent with
normal payroll practices of the Company. During the
Employment Period, the Annual Base Salary shall be
reviewed at least annually. Any increase in Annual
Base Salary shall not serve to limit or reduce any
other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced
after any such increase, and the term Annual Base
Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Signing Bonus. The Executive shall receive a Signing
Bonus ("Signing Bonus"), of thirty thousand eight
hundred thirty three dollars ($30,833), which shall
be paid to the Executive concurrently with the first
payment of Base Salary hereunder.
(iii) Bonus. The Executive may receive an annual
discretionary bonus (the "Bonus") that is (A) based
on the terms and conditions of a bonus plan adopted
for similarly situated executives and (B) subject to
the attainment of certain performance objectives,
such performance objectives and their achievement to
be determined annually by the Board, in its sole
discretion. The Bonus shall be payable upon
determination by the Board of Executive's percentage
achievement of the performance targets established by
the Board. The Bonus shall be calculated by
multiplying the Executive's percentage of attained
objectives times an amount equal to a percentage of
the Executive's Annual Base Salary for the respective
year as established by the Board (the "Annual Target
Bonus"); provided that, for the Employment Period,
the Annual Target Bonus shall be no less than fifty
percent (50%) of the Executive's Annual Base Salary.
Notwithstanding the foregoing, if the Executive is
eligible for a Bonus for a partial calendar year of
employment, the amount of the Bonus shall be prorated
and calculated based on the Annual Base Salary
actually received by the Executive for such partial
calendar year of employment.
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(iv) IPO Option. Effective as of the closing date of the
first registered underwritten public offering
completed after the Effective Date to purchase common
stock of TODCO ("Common Stock") (the "IPO"), the
Executive shall, if he is then employed hereunder,
receive a non-qualified option to purchase . no less
than 100,000 shares of common stock and provided
further that the option shall be solely to purchase
the same class of shares purchased by the public in
the IPO which currently is expected to be Class A
Common Stock (the "Public Common Stock") (it being
understood that Transocean Inc. and its subsidiaries
are currently expected to hold Class B Common Stock
which will, among other things, be entitled to voting
rights at least five (5) times as great as the voting
rights of the Public Common Stock) (the "IPO
Option"). The exercise price of the IPO Option shall
be equal to the price to the public of the Public
Common Stock sold (or other class sold) in the IPO on
the closing date of the IPO (the "IPO Date"). The IPO
Option shall be subject to (A) expiration on the
tenth anniversary of the IPO Date or, if earlier, 90
days after the Executive's Date of Termination (as
defined in Section 3(g) or Section 4(b)) and (B)
incremental exercisability of the IPO Option at the
rate of thirty-three and one-third percent (33 1/3%)
of the shares subject to the IPO Option per year on
the first (1st), second (2nd) and third (3rd)
anniversaries of the IPO Date so that cumulatively
after the end of the third (3rd) anniversary of the
IPO Date, one hundred percent (100%) of the IPO
Option shall be exercisable. The Executive must be in
continuous employment with TODCO and the Company from
the IPO Date through the date of exercisability of
each installment in order for the IPO Option to
become exercisable with respect to additional shares
on each such date, except as otherwise provided in
this Agreement. The IPO Option shall be subject to
(A) an employee stock option plan to be adopted by
TODCO ("Stock Incentive Plan"), (B) a stock option
award document containing terms consistent with the
foregoing and (C) such other terms, consistent with
the foregoing, to be established by the
administrative committee of such Stock Incentive
Plan, including, but not limited to, any restrictions
on the Executive's ability to sell, transfer or
dispose of shares of Public Common Stock acquired
upon exercise of the IPO Option following the IPO
Date or the date of any underwritten registration of
the offering of the Public Common Stock.
Further, without limiting the generality of any other
provision hereof, nothing in this Agreement shall
limit or restrict TODCO from (A) taking any action in
connection with the separation of its shallow-water
from its deep-water business on the terms determined
by Transocean Inc. (including, without limitation,
the dividend or other transfer of deep-water related
assets from TODCO), (B) entering into any arrangement
(including separation arrangements, corporate
governance arrangements, tax sharing arrangements,
registration rights agreements, transition services
agreements, all of which may be on the terms
specified by Transocean Inc.), (C) amending the
Charter, Bylaws and other governing documents
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to provide for, among other things, protections for
Transocean Inc. and granting it consent and other
rights not available to other shareholders, (D)
effecting the sale of securities to Transocean Inc.
on terms that Transocean Inc. determines, (E) varying
the terms of the IPO from those described herein, or
(F) restricting the ability of TODCO to compete with
Transocean Inc., it being specifically understood by
the parties hereto that any of such actions or other
actions taken by TODCO in connection with any IPO
(including the decision not to effect the IPO),
restructuring, any disposition transactions or
otherwise shall not constitute Good Reason, as
defined in Section 4(b), or otherwise a breach of
this Agreement.
(v) Stock Options. The Executive shall be eligible to
receive stock option awards, in the discretion of the
Board, pursuant to the terms of the Stock Incentive
Plan. The Board shall review the Executive's
eligibility to receive awards at least annually.
(vi) Incentive, Savings and Retirement Plans. The
Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices,
policies and programs applicable generally to other
senior executives of the Company; provided, however,
that the Executive shall not be eligible to
participate in plans covering senior executives of
Transocean and its affiliates other than TODCO and
the Company.
(vii) Welfare Benefit Plans. The Executive and/or the
Executive's family, as the case may be, shall be
eligible for participation in and shall receive all
benefits under welfare benefit plans, practices,
policies and programs provided by the Company
(including, without limitation, supplemental
disability and supplemental life insurance plans and
programs) to the extent applicable generally to other
senior executives of the Company.
(viii) Club Membership. The Company shall pay for, or
reimburse the Executive for the payment of, monthly
dues for a club membership as selected by the
Executive.
(ix) Office and Support Staff. The Executive shall be
entitled to an office or offices of a size and with
furnishings and other appointments, and to
secretarial and other assistance, at least equal to
the most favorable of the foregoing provided to other
senior executives of the Company.
(x) Vacation. The Executive shall be entitled to paid
vacation in accordance with the most favorable plans,
policies, programs and practices of the Company as in
effect for other senior executives of the Company,
provided that the Executive shall be entitled to at
least four (4) weeks of paid vacation during 2003 and
each twelve (12)-month period thereafter.
(xi) Right to Change Plans. The Company shall not be
obligated to institute, maintain or refrain from
changing, amending or discontinuing any benefit
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plan, program or fringe benefit, so long as such
changes are similarly applicable to senior executives
of the Company generally.
(a) Relocation Expenses. The Company agrees to reimburse Executive
for the following specified moving expenses connected with the
Executive's relocation from Dallas to Houston.
(i) Sale of Existing Home
o Real estate commission not to exceed the
lesser of 7% of sale price, or 7% of 2.5
times Annual Base Salary.
o Reasonable fees for preparation of documents.
o Reasonable recording fees.
o Reasonable legal fees.
o Title insurance and/or title search.
o Required state and/or local real estate property transfer tax.
(ii) Shipment of Personal Effects
o Moving of all reasonable household goods, including packing, crating
and insurance coverage (through the carrier).
(iii) Home Purchase Assistance
o Reasonable closing expenses incurred in the purchase of a home in
Houston, Texas up to a maximum of the lesser of 3.5% of the new home
purchase price, or 3.5% of 2.5 times Annual Base Salary. Reasonable
expenses include title search and mortgage title insurance, attorney's
fees, loan origination fee up to 3/4 of 1% of the mortgage amount not
to exceed $1,500, recording and notary fees, credit report, state and
local transfer taxes, home inspection fees as required, flood zone
determination, & survey fees.
(iv) Temporary Living expenses
Reasonable temporary living expenses for you in
Houston, Texas and once a week travel expenses to and
from Dallas through June 2003.
Reasonable temporary living expenses for you and your
family in Houston, Texas from June 2003 through July
2003.
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3. TERMINATION OF EMPLOYMENT.
(a) Nonoccurrence of the IPO.
(i) If during the eighteen (18) month period after the
Effective Date (the "Waiting Period") an IPO does not
occur (the "IPO Nonoccurrence"), then the Executive
may voluntarily terminate his employment for any
reason during the ninety (90)-day period immediately
following the expiration of the Waiting Period
("Approved Termination").
(ii) In the event of an Approved Termination, the
Executive shall only receive a lump sum cash payment
in the amount equal to two years of his Annual Base
Salary, unless a Qualifying Termination occurs and
the Executive is entitled to Severance Benefits under
Section 4(a) in which event Section 4 will control in
lieu of this Section 3(a)(ii).
(a) Death or Disability.
(i) The Executive's employment shall terminate
automatically upon the Executive's death during the
Employment Period. If the Board determines, in good
faith, that a Disability of the Executive has
occurred during the Employment Period (pursuant to
the definition of Disability set forth below), it may
give to the Executive written notice in accordance
with Section 12(b) of this Agreement of its intention
to terminate the Executive's employment. In such
event, the Executive's employment with TODCO and the
Company shall terminate effective on the thirtieth
(30th) day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided
that, within the thirty (30) days after such receipt,
the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes
of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties
with TODCO on a full-time basis for one hundred
eighty (180) consecutive business days as a result of
incapacity due to mental or physical illness, which
is determined to be total and permanent by a
physician selected by TODCO or the Company or their
insurers and acceptable to the Executive or the
Executive's legal representative.
(ii) In the event of a termination due to death or
Disability, the Executive shall receive (A) upon the
Date of Termination, the unpaid Annual Base Salary,
at the rate then in effect, accrued through the Date
of Termination, (B) any Bonus to which the Executive
is entitled, payable after the Board determines
whether the performance objectives have been met for
the relevant calendar year, and (C) all other
benefits to which the Executive has a vested right at
the time, according to the provision of the governing
plan or program. In addition, any IPO Option shall
become fully exercisable as of the Date of
Termination and remain exercisable for its
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term. The Executive's beneficiaries shall be entitled
to participate in all applicable benefit plans and
programs in accordance with the eligibility
provisions thereof.
(a) Voluntary Termination by Executive.
(i) The Executive may voluntarily terminate his
employment during the Employment Period at any time
by giving the Board ninety (90) days' advance Notice
of Termination, as defined in Section 3(f) of this
Agreement.
(ii) In the event of a voluntary termination by the
Executive (other than a Qualifying Termination within
eighteen (18) months of a Change in Control (as
provided in Section 4) or a termination pursuant to
Section 3(a)), the Executive shall receive (A) upon
the Date of Termination, the unpaid Annual Base
Salary, at the rate then in effect, accrued through
the Date of Termination, (B) any Bonus to which the
Executive is entitled, payable after the Board
determines whether the performance objectives have
been met for the relevant calendar year, and (C) all
other benefits to which the Executive has a vested
right at the time, according to the provision of the
governing plan or program. The Executive must provide
a Notice of Termination at least ninety (90) days
prior to the Date of Termination in order to receive
the Bonus under this Section 3(c)(ii).
(a) Termination for Cause.
(i) The Chief Executive Officer of the Company may
terminate the Executive's employment at any time
during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
A. The willful and continued failure of the
Executive to perform substantially the
Executive's duties, typical for the
position, with TODCO and the Company (other
than any such failure resulting from
incapacity due to physical or mental
illness) or any reasonable duties assigned
or reasonable orders given to the Executive
by the Board from time to time, after a
written demand for performance is delivered
to the Executive by the Chief Executive
Officer, which specifically identifies the
manner in which the Chief Executive Officer
believes that the Executive has not
substantially performed the Executive's
duties;
B. The willful engagement by the Executive in
illegal conduct, gross misconduct,
dishonesty or self-dealing with the Company,
TODCO or any of TODCO's affiliates, which
results from a willful act or omission or
from gross negligence and that is materially
and demonstrably injurious or reasonably
likely to
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become materially injurious to the Company,
TODCO or any of TODCO's affiliates;
C. The conviction of the Executive by a court
of competent jurisdiction of any felony or a
crime involving moral turpitude; or
D. The Executive's breach of the
confidentiality or noncompetition provisions
of this Agreement or any other material
breach of the Executive's obligations
hereunder.
For purposes of this provision, no act or failure to
act, on the part of the Executive, shall be
considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without
reasonable belief that the Executive's action or
omission was in the best interests of the Company.
Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the
Parent Board or upon the instructions of the Chief
Executive Officer or based upon the advice of counsel
for the Company or Parent shall be conclusively
presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of
the Company, TODCO and TODCO's affiliates.
For purposes of this Agreement, TODCO's affiliates shall
include any company controlled by, controlling or under common
control with TODCO.
(ii) In the event of termination for Cause, the Executive
shall receive the unpaid Annual Base Salary, at the
rate then in effect, accrued through the Date of
Termination, and the Executive shall immediately
thereafter forfeit all rights and benefits (other
than vested benefits) he would otherwise have been
entitled to receive under this Agreement. The
Executive will lose any right to supplemental
benefits provided by TODCO and the Company,
including, but not limited to, retirement benefits.
TODCO and the Company thereafter shall have no
further obligations under this Agreement.
(a) Involuntary Termination other than for Cause.
(i) The Company may terminate the Executive's employment
other than for Cause at any time during the
Employment Period.
(ii) In the event of involuntary termination other than
for Cause, upon the Date of Termination, the
Executive shall receive (A) the unpaid Annual Base
Salary otherwise payable to the Executive for the
remaining Employment Period, (B) any Bonus to which
the Executive is entitled, payable after the Board
determines whether the performance objectives have
been met for the relevant calendar year, (C) if the
date of termination occurs after the IPO Date,
immediate vesting of any IPO Option and continued
exercisability of such IPO Option through the full
term of the
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option, and (D) all other benefits to which the
Executive has a vested right at the time, according
to the provisions of the governing plan or program.
(a) Notice of Termination. Any voluntary termination by the
Executive or termination by TODCO for Cause shall be
communicated by Notice of Termination to the other party
hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) to the extent applicable, sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision
so indicated and (iii) if the Date of Termination (as defined
in Section 3(g)) is other than the date of receipt of such
notice, specifies the termination date. The failure by TODCO
to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Cause shall not
waive any right of TODCO hereunder or preclude TODCO from
asserting such fact or circumstance in enforcing its rights
hereunder.
(a) Date of Termination. "Date of Termination" means (i) if the
Executive voluntarily terminates his employment, the date
specified in the notice; (ii) if the Executive's employment is
terminated by TODCO for Cause, the date of receipt of the
Notice of Termination or any later date specified therein, as
the case may be; (iii) if the Executive's employment is
terminated by TODCO other than for Cause or by the Executive
for the nonoccurrence of the IPO within the waiting period,
the Executive's last day as an active employee of TODCO and
the Company; or (iv) if the Executive's employment is
terminated by reason of death or Disability, the date of death
of the Executive or the Disability Effective Date, as the case
may be.
4. CHANGE IN CONTROL.
(a) Employment Termination in Connection with a Change in Control.
In the event of a Qualifying Termination (as defined below)
within the eighteen (18)-month period immediately following a
Change in Control (as defined in Section 4(c)), in lieu of all
other benefits provided to the Executive under the provisions
of this Agreement, the Executive shall receive the following
severance benefits (hereinafter referred to as the "Severance
Benefits"):
(i) An amount equal to two (2) times the Executive's
"annual compensation" for the year of termination.
For purposes of this Section 4(a)(i), "annual
compensation" means the sum of (A) the Executive's
Annual Base Salary in effect as of the Date of
Termination and (B) the Executive's Annual Target
Bonus for the year of termination, or, if greater,
the highest Bonus paid to the Executive under this
Agreement during the most recent thirty-six (36)
month period;
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(ii) Any Bonus to which the Executive is entitled, payable
after the Board determines whether the performance
objectives have been met for the relevant calendar
year;
(iii) A continuation of the welfare benefits of medical
insurance, dental insurance, disability insurance and
life insurance for two (2) full years after the Date
of Termination. These benefits shall be provided to
the Executive at the same premium cost and at the
same coverage level, as in effect as of the Date of
Termination. However, in the event the premium cost
and/or level of coverage shall change for all
employees of TODCO and the Company, the cost and/or
coverage level, likewise, shall change for the
Executive in a corresponding manner.
The continuation of these welfare benefits shall be
discontinued prior to the end of the two (2) year
period in the event the Executive has available
substantially similar benefits from a subsequent
employer, as determined by the Board or its designee.
Upon the termination of these welfare benefits, the
Executive shall be provided a COBRA continuation
election under TODCO's or the Company's group health
plans; and
(iv) If such Change in Control occurs after the IPO Date,
immediate vesting of any IPO Option and continued
exercisability of such IPO Option through the full
term of the option.
For purposes of this Agreement, a Qualifying Termination shall mean a
termination of the Executive's employment by TODCO other than for Cause
(as provided in Section 3(e) herein) or by the Executive for Good
Reason (as defined in Section 4(b)).
(a) Definition of "Good Reason." For purposes of this Agreement,
"Good Reason" shall mean:
(i) The removal of the Executive from the position of
Vice President Marketing or the assignment to the
Executive of any duties materially inconsistent with
the Executive's position with TODCO and the Company;
(ii) The relocation of the Executive's principal place of
employment to a location more than fifty (50) miles
from the Executive's principal place of employment as
of the date immediately preceding the relocation; or
(iii) A reduction by TODCO and the Company in the
Executive's Annual Base Salary, as in effect on the
Effective Date or as the same may be increased from
time to time, in the amount of twenty-five percent
(25%) or more.
The foregoing notwithstanding, the parties hereto agree that
the failure of the IPO to occur shall not constitute Good
Reason (as defined in this Section 4(b)). With
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respect to a termination by the Executive for Good Reason, the
"Date of Termination" means the Executive's last day as an
active employee of TODCO and the Company.
(a) Definition of "Change in Control." A Change in Control of
TODCO shall be deemed to have occurred as of the first (1st)
day any one or more of the following conditions shall have
been satisfied:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of shares
representing 20% or more of the combined voting power
of the then outstanding voting securities of TODCO
entitled to vote generally in the election of
directors (the "Outstanding TODCO Voting
Securities"); provided, however, that for purposes of
this subsection (i), the following acquisitions shall
not constitute a Change in Control: (A) any
acquisition directly from TODCO, (B) any acquisition
by TODCO (it being understood that an acquisition by
an acquiror of greater than 20% of the Outstanding
TODCO Voting Securities directly from TODCO shall not
prevent such acquiror from causing a subsequent
Change in Control if it thereafter acquires an
additional 20% of the Outstanding TODCO Voting
Securities in a transaction that would otherwise
constitute a Change of Control), (C) any acquisition
by any employee benefit plan (or related trust)
sponsored or maintained by TODCO or any corporation
or other entity controlled by TODCO, (D) any
acquisition by any corporation or other entity
pursuant to a transaction which complies with clauses
(A), (B) and (C) of Section 4(c)(iii), (E) an
acquisition of securities effected in connection with
a distribution of any class of Common Stock of TODCO
to shareholders of Transocean Inc. in a transaction
(including any distribution in exchange for shares of
capital stock or other securities of Transocean Inc.)
intended to qualify as a tax-free distribution under
Section 355 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor provision (a
"Tax-Free Spin-Off"), (F) any acquisition by
Transocean Inc. or any of its affiliates excluding
TODCO and its subsidiaries (collectively,
"Transocean"), (G) any acquisition from Transocean
pursuant to a public offering of securities
registered under a registration statement filed with
the Securities and Exchange Commission, or (H) any
acquisition immediately following which Transocean
has beneficial ownership of at least 50% or more of
the Outstanding TODCO Voting Securities; provided
that any such acquisition that, but for this clause
(H), would otherwise constitute a Change of Control
under this Section 4(c)(i) shall be deemed to be a
Change in Control at the time that Transocean no
longer has beneficial ownership of at least 50% or
more of the Outstanding TODCO Voting Securities, if
such individual, entity or group that made such
acquisition continues to own 20% or more of the
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Outstanding TODCO Voting Securities following such
time that Transocean no longer has such beneficial
ownership;
(ii) Individuals who, as of the date hereof, are members
of the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the
Board; provided, however, that for purposes of this
Section 4, any individual becoming a director
subsequent to the date hereof whose election, or
nomination for election by TODCO's shareholders, was
approved by either (A) a vote of at least a majority
of the directors then comprising the Incumbent Board
or (B) Transocean, shall be considered as though such
individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result
of an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than
either Transocean or the Board;
(iii) Consummation of a reorganization, merger, conversion
or consolidation or sale or other disposition of all
or substantially all of the assets of TODCO (a
"Business Combination"), in each case, unless,
following such Business Combination, (A) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding TODCO Voting Securities immediately prior
to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50%)
of the then outstanding combined voting power of the
then outstanding voting securities entitled to vote
generally in the election of directors of the
corporation or other entity resulting from such
Business Combination (including, without limitation,
a corporation or other entity which as a result of
such transaction owns TODCO or all or substantially
all of TODCO's assets either directly or through one
or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination of the Outstanding TODCO
Voting Securities, (B) no Person (excluding
Transocean and any corporation or other entity
resulting from such Business Combination or any
employee benefit plan (or related trust) of TODCO or
such corporation or other entity resulting from such
Business Combination) beneficially owns, directly or
indirectly, twenty percent (20%) or more of the
combined voting power of the then outstanding voting
securities of the corporation or other entity
resulting from such Business Combination except to
the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of
the members of the board of directors of the
corporation or other entity resulting from such
Business Combination were members of the Incumbent
Board at the time of the execution of the initial
agreement, or of the action of the Board, providing
for such Business Combination;
(iv) Approval by the shareholders of TODCO of a complete
liquidation or dissolution of TODCO other than in
connection with the transfer of all or
-12-
substantially all of the assets of TODCO to
Transocean or to an affiliate or a subsidiary of
TODCO and in connection with such transfer the
Executive is offered the opportunity to continue his
employment on substantially the same terms as
provided in this Agreement including, without
limitation, the Change in Control provisions of this
Section 4; or
(v) A "Change of Control" of Transocean, as defined in
Section 6.10 of the Long-Term Incentive Plan of
Transocean, as amended and restated as of January 1,
2000, which occurs while Transocean owns 50% or more
of the Outstanding TODCO Voting Securities.
Notwithstanding the foregoing, no Business Combination between
Transocean and TODCO and its subsidiaries or between TODCO and
its own subsidiaries shall constitute a Change in Control
under Section 4(c) of this Agreement.
5. CERTAIN ADDITIONAL PAYMENTS.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined
that any payment or distribution by the Company, TODCO or any
of its affiliates, to or for the benefit of the Executive
(whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required
under this Section 5) (a "Payment") would be subject to the
excise tax imposed by Code Section 4999 or any interest or
penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 5(a), if it shall be determined
that the Executive is entitled to a Gross-Up Payment, but that
the Payments do not exceed one hundred and ten percent (110%)
of the greatest amount (the "Reduced Amount") that could be
paid to the Executive such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment
shall be made to the Executive and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(a) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether
and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment, and the assumptions to be utilized in
arriving at such determination, shall be made by Ernst &
Young, L.L.P. or such other certified public accounting firm
as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations to
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TODCO, the Company and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested
by TODCO or the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 5,
shall be paid by the Company to the Executive within five (5)
days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon
TODCO, the Company and the Executive. As a result of the
uncertainty in the application of Code Section 4999 at the
time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made
("Underpayment") consistent with the calculations required to
be made hereunder. In the event that TODCO or the Company
exhausts its remedies pursuant to Section 5(c) and the
Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the benefit of
the Executive.
(a) The Executive shall notify TODCO and the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the
Executive is informed in writing of such claim and shall
apprise TODCO and the Company of the nature of such claim and
the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of
the thirty (30)-day period following the date on which it
gives such notice to TODCO and the Company (or such shorter
period ending on the date that any payment of taxes with
respect to such claim is due). If TODCO or the Company
notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the
Executive shall:
(i) Give TODCO and the Company any information reasonably
requested by TODCO and the Company relating to such
claim;
(ii) Take such action in connection with contesting such
claim as TODCO or the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by TODCO or the Company;
(iii) Cooperate with TODCO and the Company in good faith in
order effectively to contest such claim; and
(iv) Permit TODCO and the Company to participate in any
proceedings relating to such claim;
-14-
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section 5(c), TODCO and the Company shall control all
proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as TODCO or the Company shall determine; provided, however,
that if TODCO or the Company directs the Executive to pay such
claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive harmless, on
an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that
any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, TODCO's
and the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(a) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(c), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to TODCO's or the Company's complying
with the requirements of Section 5(c)) promptly pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 5(c), a determination is made
that the Executive shall not be entitled to any refund with
respect to such claim and TODCO or the Company does not notify
the Executive in writing of its intent to contest such denial
of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any plan, program, policy
or practice provided by TODCO or the Company and for which the Executive may
qualify, nor, subject to Section 12(h), shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company, TODCO or any of TODCO's affiliates. Amounts
-15-
that are vested benefits or that the Executive is otherwise entitled to receive
under any plan, policy, practice or program of, or any contract or agreement
with the Company, TODCO or any of TODCO's affiliates at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program, or contract or agreement except as explicitly modified by
this Agreement.
7. NONCOMPETITION.
(a) The Executive shall not for a period (the "Restricted Period")
of (i) six (6) months after the Date of Termination for a
termination of employment described in Section 3 of this
Agreement or (ii) twelve (12) months after the Date of
Termination for a Qualifying Termination that occurs within
the eighteen (18)-month period immediately following a Change
in Control, engage in Competition with the Company, TODCO, or
any of TODCO's affiliates. For purposes of this Section 7,
"Competition" shall mean the Executive's engaging in or
otherwise being a director, officer, employee, principal,
agent, shareholder, member, investor, consultant, associate,
owner or partner of, or permitting his name to be used in
connection with the activities of any business or organization
that is primarily engaged in the offshore or inland marine
contract drilling industry in direct competition with the
Company, TODCO or any of TODCO's affiliates, but shall not
preclude the Executive's becoming the registered or beneficial
owner of up to two percent (2%) of any class of capital stock
of any such corporation which is registered under the
Securities Exchange Act of 1934, as amended, provided the
Executive does not actively participate in the business of
such corporation until the end of the Restricted Period.
(a) The Executive acknowledges that he will derive significant
value from TODCO's and the Company's agreement in Section 9 to
provide the Executive with that confidential information to
enable the Executive to optimize the performance of the
Executive's duties to TODCO. The Executive further
acknowledges that his fulfillment of the obligations contained
in this Agreement, including, but not limited to, the
Executive's obligation neither to disclose nor to use TODCO's
and the Company's confidential information other than for
TODCO's and the Company's exclusive benefit and the
Executive's obligation not to compete contained in clause (a)
above, is necessary to protect TODCO's and the Company's
confidential information and, consequently, to preserve the
value and goodwill of TODCO and the Company. The Executive
further understands that the foregoing restrictions may limit
his ability to engage in certain businesses anywhere in the
world during the period provided for in clause (a), but
acknowledges that the Executive will receive sufficiently high
remuneration and other benefits under this Agreement to
justify such restrictions. The Executive acknowledges the
time, geographic and scope limitations of the Executive's
obligations under clause (a) above are reasonable, especially
in light of TODCO's and the Company's desire to protect its
confidential information, and that the Executive will not be
precluded from gainful employment if the Executive is
obligated not to compete with TODCO, any of TODCO's affiliates
and the Company during the period as described above.
-16-
It is expressly understood and agreed that TODCO, the Company
and the Executive consider the restrictions contained in this
Section 7 to be reasonable and necessary to protect the
proprietary information of TODCO and the Company.
Nevertheless, if any of the aforesaid restrictions are found
by a court having jurisdiction to be unreasonable, or overly
broad as to geographic area or time, or otherwise
unenforceable, the parties intend for the restrictions therein
set forth to be modified by such court so as to be reasonable
and enforceable and, as so modified by the court, to be fully
enforced.
8. NONSOLICITATION.
The Executive shall not for a period of (i) one (1) year after the Date of
Termination for a termination of employment described in Section 3 of this
Agreement or (ii) eighteen (18) months after the Date of Termination for a
Qualifying Termination that occurs within the eighteen (18)-month period
immediately following a Change in Control solicit for employment or employ any
employee of the Company, TODCO or any of TODCO's affiliates.
9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary capacity
for the benefit of the Company, TODCO and TODCO's affiliates, all secret or
confidential information, knowledge or data relating to the Company, TODCO or
any of TODCO's affiliates, and their respective businesses, which shall have
been obtained by the Executive during the Executive's employment by the Company,
TODCO or any of TODCO's affiliates and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the Executive's
employment with TODCO and the Company, the Executive shall not, without the
prior written consent of TODCO and the Company or as may otherwise be required
by law or legal process, communicate or divulge any such information, knowledge
or data to anyone other than TODCO, the Company and those designated by them.
The parties hereto agree and acknowledge that, as of the Effective Date, TODCO
and the Company have provided the Executive with secret or confidential
information, knowledge or data described in this Section 9, and that TODCO and
the Company will continue to provide such information, knowledge or data during
the Employment Period.
10. ENFORCEMENT AND REMEDIES.
(a) The Executive acknowledges that money damages would not be
sufficient remedy for any breach of Sections 7, 8 and 9 by the
Executive, and that TODCO and the Company shall be entitled to
enforce the provisions of such Sections 7, 8, and 9 by
terminating any payments then owing to the Executive under
this Agreement and/or to specific performance and injunctive
relief as remedies for such breach or any threatened breach.
Such remedies shall not be deemed the exclusive remedies for a
breach of Sections 7, 8 and 9, but shall be in addition to all
remedies available at law or in equity to TODCO and the
Company, including without limitation, the recovery of damages
from the Executive and the Executive's agents involved in such
breach and remedies available to TODCO and the Company
pursuant to this and other agreements with the Executive.
-17-
(a) Any controversy or claim arising out of or relating to this
Agreement or breach of this Agreement, other than claims
entitling the claimant to injunctive relief or claims or
disputes arising from a violation or alleged violation by the
Executive of the provisions of Sections 7, 8, or 9 shall be
settled exclusively by final and binding arbitration in
Houston, Texas, in accordance with the Employment Arbitration
Rules of the American Arbitration Association (the "AAA"), and
judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction. The arbitrator shall
be selected by mutual agreement of the parties, if possible.
If the parties fail to reach agreement upon appointment of an
arbitrator within thirty (30) days following receipt by one
party of the other party's notice of desire to arbitrate, the
arbitrator shall be selected from a panel or panels of persons
submitted by the AAA. The selection process shall be that
which is set forth in the AAA Employment Arbitration Rules
then prevailing, except that, if the parties fail to select an
arbitrator from one or more panels, the AAA shall not have the
power to make an appointment but shall continue to submit
additional panels until an arbitrator has been selected. The
costs of the arbitrator shall be borne by both parties
equally. Notwithstanding the foregoing, the arbitrator may
require attorney expenses to be paid by the nonprevailing
party. Either party may appeal the arbitration award and
judgment thereon and, in actions seeking to vacate an award,
the standard of review to be applied to the arbitrator's
findings of fact and conclusions of law will be the same as
that applied by an appellate court reviewing a decision of a
trial court sitting without a jury. This agreement to
arbitrate shall not preclude the parties from engaging in
voluntary, non-binding settlement efforts including mediation.
(a) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the
Company or its affiliated companies may have against the
Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains
other employment. With respect to claims which arise from and
after the date of a Change in Control, the Company agrees to
pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the
validity or enforceability of, or liability under this
Agreement (including, but not limited to, as a result of any
contest by the Executive about the amount of any payment
pursuant to Section 4 or 5 of this Agreement), plus in each
case interest on any delayed payment at the applicable Federal
short-term rate provided for in Section 7872(f)(2)(A) of the
Code.
11. SUCCESSORS.
(a) This Agreement is assignable by TODCO and the Company, without
the consent of the Executive, to any affiliate of Transocean
Inc. in the event that TODCO
-18-
determines to conduct its shallow-water or inland barge
business in or through an entity other than TODCO.
(a) This Agreement is personal to the Executive and without the
prior written consent of TODCO or the Company shall not be
assignable by the Executive otherwise than by will or the laws
of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive's legal
representatives.
(a) This Agreement shall inure to the benefit of and be binding
upon TODCO and the Company and its respective successors and
assigns.
(a) As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any respective successor to its
business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law, or otherwise.
12. MISCELLANEOUS.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS. The captions of
this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(a) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to TODCO:
TODCO
0000 X. Xxx Xxxxxxx Xxxxxxx X.
Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Attention: Chief Executive Officer
If to the Company:
TODCO Management Services, LLC
0000 X. Xxx Xxxxxxx Xxxxxxx X.
Xxxxx 000
Xxxxxxx, Xxxxx 00000-0000
Attention: Chief Executive Officer
If to the Executive:
Xxxxx X. Xxxxxxx
--------------------
--------------------
-19-
or to such other address as either party shall have furnished
to the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by
the addressee.
(a) The Executive hereby represents and warrants that the
execution and performance of this Agreement is not in
violation of any existing agreement to which he is a party.
(a) TODCO hereby absolutely, irrevocably and unconditionally
guarantees the full payment and performance of all obligations
of the Company under this Agreement as the same may be
hereafter amended from time to time by TODCO, the Company, and
the Executive. TODCO's guarantee and undertakings hereunder
shall continue in force until all of the Company's obligations
under this Agreement and all of TODCO's obligations have been
duly performed.
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(a) TODCO and the Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(a) The Executive's, TODCO's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive, TODCO or the
Company may have hereunder, shall not be deemed to be a waiver
of such provision or right or any other provision or right of
this Agreement.
(a) The Executive, TODCO and the Company acknowledge that this
Agreement supersedes any prior agreements or understandings,
oral or written, between the Executive, TODCO and the Company,
with respect to the subject matter hereof and constitutes the
entire agreement of the parties with respect thereto.
(a) This Agreement shall not be varied, altered, modified,
canceled, changed or in any way amended except by mutual
agreement of the parties in a written instrument executed by
the parties hereto or their legal representatives.
-20-
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and TODCO and the Company have caused these presents to be executed in its name
on its behalf, all as of this 28th day of April, 2003, but effective as of the
Effective Date.
/s/ XXXXX X. XXXXXXX
---------------------------------------
Xxxxx X. Xxxxxxx
TODCO
By: /s/ XXX XXXX
------------------------------------
Xxx Xxxx
President and CEO
TODCO MANAGEMENT SERVICES, INC.
By: /s/ T. XXXXX X'XXXXX
------------------------------------
T. Xxxxx X'Xxxxx
Vice President
-21-
