AGREEMENT
THIS AGREEMENT ("Agreement") is entered into between Transocean Inc.
("Parent"), Transocean Offshore Deepwater Drilling Inc. (the "Company") and J.
Xxxxxxx Xxxxxxx (the "Executive"), dated as of October 10, 2002 (the "Effective
Date").
WHEREAS, the Company, and The Executive have previously entered into an
Employment Agreement dated effective September 22, 2000 ("Employment Agreement")
which replaced an employment agreement dated effective May 14, 1999 (the "Prior
Employment Agreement"); and
WHEREAS, after approval and action by the Board of Directors of Transocean
Inc. and in light of management changes and the Executive's change in employment
duties, the Executive and Company wish to revoke the Employment Agreement in
exchange for the consideration set forth herein.
NOW, THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
1. CHANGE IN POSITION. Effective as of the date of this Agreement, the
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Executive agrees to resign as Chief Executive Officer of Transocean
Inc. and assume the title and duties of Chairman of the Board of
Directors of Transocean Inc. The Executive agrees to remain as
Chairman of the Board until the earlier of (a) any regularly scheduled
meeting of the Board held in October 2004, or (b) October 16, 2004, at
which time the Executive shall tender the Executive's resignation as
Chairman for action by the Board.
2. EMPLOYMENT STATUS. Unless terminated for Cause, the Executive agrees
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to continue as an employee of Company until October 16, 2004, at which
time the Executive shall take Early Retirement under the terms of
Company's qualified defined benefit retirement plan (the "Retirement
Plan"). Company retains the right, however, to terminate the
Executive's employment at any time and for any reason provided that in
the event that the Executive is terminated by Company for other than
Cause or Executive terminates his employment due to a Constructive
Termination, then Company agrees to make a lump sum cash payment equal
to the excess of (a) the actuarial equivalent of the benefit under the
Retirement Plan (utilizing actuarial assumptions no less favorable to
the Executive than those in effect under Company's Supplemental
Retirement Plan immediately prior to termination and assuming benefits
commence on October 16, 2004), and any excess or supplemental
retirement plan in which the Executive participates (together, the
"SERP") which the Executive would receive if the Executive's
employment continued until October 16, 2004 assuming for this purpose
that all accrued benefits are fully vested and assuming that the
Executive's compensation is as set forth in Section 3 herein over (b)
the actuarial equivalent of the Executive's actual benefit (paid or
payable), if any, under the Retirement Plan and the SERP as of the
date of termination.
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3. BENEFIT PLANS. While employed by Company, the Executive shall remain
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eligible to participate in any of the incentive, savings and
retirement plans, practices and programs and/or welfare benefit plans,
practices, policies and programs offered to other senior executives of
Company with the exception that the Executive shall not receive any
further equity awards under the Transocean Long Term Incentive Plan.
Furthermore, effective as of October 16, 2002, the Executive's salary
shall be reduced to $475,000 per year and the Executive's target bonus
opportunity reduced to 45%. Accordingly, the Executive's bonus for
2002 will thus be proportionately adjusted based upon these changes.
It is understood that the Executive's new duties will occupy no more
than 50% of the Executive's available time. The Executive's
compensation shall be reviewed each May and December and adjusted as
deemed appropriate by the Executive Compensation Committee of
Transocean Inc. in its sole discretion.
4. OPTIONS. Unless the Executive is terminated for Cause, if the
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Executive is no longer employed by Transocean for any reason including
but not limited to voluntary termination, then all options outstanding
at the time of such termination shall become immediately exercisable
and shall remain exercisable for the remainder of their terms. If the
Executive is terminated for Cause, then the provisions of the grants
shall remain unchanged and operate accordingly.
5. PAYMENT TO THE EXECUTIVE.
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a. Subject to the terms of this Agreement, the Company agrees to pay
to the Executive an aggregate amount of $4,877,593 ("the
Principal Amount"), together with accrued interest. This amount
shall be paid in three installments, with one-third of the
Principal Amount, plus accrued interest, paid on the first
business day following each of October 15, 2002, October 15, 2003
and October 15, 2004. Interest shall accrue on the outstanding
balance from January 1, 2001, through the date of each payment,
at 120% of the short-term Applicable Federal Rate for January,
2001, compounded semi-annually, as published by the Internal
Revenue Service for purposes of Section 1274(d) of the Internal
Revenue Code of 1986. The Executive specifically agrees and
acknowledges that the payments set forth in Section 5 of this
Agreement are not includable in determining the amount payable
under the Company's Retirement Plan and/or Supplemental
Retirement Plan.
b. 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, the Parent and
any affiliated company 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 Section 4999 of the Code or any interest or penalties
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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(b), if
it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Payments do not exceed 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.
c. Subject to the provisions of Section 5(d), all determinations
required to be made under this Section 5(b)-(e), 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 both to the Company and
the Executive within 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 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 days of the
receipt of the Accounting Firm's determination. Any determination
by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of
Section 4999 of the Code 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 the Company
exhausts its remedies pursuant to Section 5(d) 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.
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d. The Executive shall notify 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 business days after the Executive is informed in writing
of such claim and shall apprise 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 30-day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If
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 the Company any information reasonably requested by the
Company relating to such claim;
(ii) Take such action in connection with contesting such claim as
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 the Company;
(iii) Cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) Permit the Company to participate in any proceedings
relating to such claim;
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(d), 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 the Company shall determine; provided, however, that
if 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
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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, 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.
e. If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 5(d), the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 5(d)) 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(d), a determination is made that the
Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 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. OTHER PAYMENT PROVISIONS.
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a. Termination. If (i) the Executive voluntarily terminates
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employment with the Company and all companies controlled by,
controlling or under common control with the Company (the "TSF
Group") for any reason or (ii) Executive is terminated by Company
for other than Cause or (iii) Executive leaves as a result of
Death or Disability prior to the first business day following
October 15, 2004 (the "Expiration Date"), the Executive shall
nevertheless receive a lump sum cash payment equal to the unpaid
Principal Amount, plus accrued interest to the date of payment,
as determined in accordance with Section 5(a). The Company shall
also pay any amounts due pursuant to Section 5(b)-(e) of this
Agreement.
b. Cause. If the Executive's employment with the TSF Group is
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terminated for Cause prior to the Expiration Date, the Executive
shall have no right to any further payments under Section 5 and
such unpaid installments will be forfeited.
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7. EFFECT ON EMPLOYMENT AGREEMENT. From and after the Effective Date,
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this Agreement shall supersede any other agreement between the parties
with respect to the subject matter hereof, in particular, the
Employment Agreement previously entered into between the parties, and
the Employment Agreement shall have no further force or effect.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
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capacity for the benefit of the TSF Group all secret or confidential
information, knowledge or data relating to the TSF Group, and their
respective businesses, which shall have been obtained by the Executive
during the Executive's employment by the TSF Group 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 the TSF Group,
the Executive shall not, without the prior written consent of 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 the Company and those designated by it. In no event
shall an asserted violation of the provisions of this Section 8
constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
9. SUCCESSORS.
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a. This Agreement is personal to the Executive and without the prior
written consent of the Company and Parent 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.
b. This Agreement shall inure to the benefit of and be binding upon
the Company and Parent and their successors and assigns.
c. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any respective successor to its business
and/or assets which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
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10. MISCELLANEOUS.
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a. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, 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.
b. 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 the Executive:
J. Xxxxxxx Xxxxxxx
0 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
If to the Company or Parent:
Transocean Offshore Deepwater Drilling Inc.
0 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
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.
c. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
d. 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.
e. The Executive's, the Company's or Parent's failure to insist upon
strict compliance with any provision of this Agreement or the
failure to assert any right the Executive, the Company or Parent
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.
f. Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by
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the Company is "at will" and the Executive's employment may be
terminated by either the Executive or the Company at any time.
11. CERTAIN DEFINITIONS.
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a. Cause. For purposes of this Agreement, "Cause" shall mean: (i)
the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of
its affiliates (other than any such failure resulting from
incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive
by the Parent Board (as defined herein) or the Chief Executive
Officer of the Company which specifically identifies the manner
in which the Parent Board or the Chief Executive Officer of the
Company believes that the Executive has not substantially
performed the Executive's duties; or (ii) the willful engaging by
the Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the TSF Group. 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 TSF Group. 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 a senior officer of Parent or the Company or
based upon the advice of counsel for Parent or the Company 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 TSF
Group. The cessation of employment of the Executive shall not be
deemed to be for Cause unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Parent Board at a meeting of the Parent
Board called and held for such purpose (after reasonable notice
is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Parent
Board), finding that, in the good faith opinion of the Parent
Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail. As used in this Section, "Parent Board" means
the board of directors of the Parent, except that in the event
that the Parent no longer owns 50% of the outstanding voting
securities of the Company, then the Parent Board shall mean the
Board of Directors of the Company.
b. Notice of Termination. Any termination by the Company for Cause,
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or by the Executive due to a Constructive Termination, shall be
communicated by Notice of Termination to the Executive in
accordance with Section 10.b. of this Agreement. For purposes of
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this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision of 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 is other than the date of receipt of such notice,
specifies the termination date (which date shall not be more than
thirty days after the giving of such notice). The failure by the
Company or the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a
showing of Constructive Termination or Cause shall not waive any
right of the Company hereunder or preclude the Executive or the
Company from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
c. Constructive Termination. For purposes of this Agreement,
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"Constructive Termination" shall mean a voluntary termination of
employment by the Executive that occurs within 60 days after (i)
a substantial diminution in the Executive's position, authority,
duties and responsibilities, taken as a whole, excluding for this
purpose changes in office, title and/or reporting requirements
which are determined by the Chief Executive Officer of Parent to
be primarily attributable to reorganization of responsibilities
following significant corporate events or (ii) a substantial
reduction in Executive's base salary as in effect on the
Effective Date excluding for this purpose any across-the-board
reductions that similarly affect officers of the Company and
taking into account the scope of the Executive's duties from time
to time.
d. Date of Termination. "Date of Termination" means (i) if the
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Executive's employment is terminated by the TSF Group for Cause,
or by the Executive due to a Constructive Termination, the date
of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the TSF Group other than for Cause or
Disability, the Date of Termination shall be the date on which
the Company notifies the Executive of such termination, (iii) if
the Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
e. Disability. "Disability" means the absence of the Executive from
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the Executive's duties with the TSF Group on a full-time basis
for 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 the Company or its insurers
and acceptable to the Executive or the Executive's legal
representatives.
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f. Disability Effective Date. "Disability Effective Date" means the
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30th day after the Executive receives notice from any member of
the TSF Group of the Executive's termination of employment due to
Disability.
IN WITNESS WHEREOF, the parties hereto have evidenced their consent to the
terms of this Agreement, as set forth below.
EXECUTIVE
/s/ J. Xxxxxxx Xxxxxxx
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J. Xxxxxxx Xxxxxxx
TRANSOCEAN OFFSHORE
DEEPWATER DRILLING INC.
/s/ Xxxx X. Xxxxx
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By: Xxxx X. Xxxxx
TRANSOCEAN INC.
/s/ Xxxx X. Xxxxx
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By: Xxxx X. Xxxxx
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