ENERGY XXI (BERMUDA) LIMITED EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.2
ENERGY
XXI (BERMUDA) LIMITED
This
Employment Agreement (“Agreement”)
by and between Energy XXI (Bermuda) Limited, a Bermuda corporation (“Company”),
and Xxxxxx X. Xxxxx (“Executive”)
is entered into effective as of September 10, 2008 (the “Effective
Date”).
WHEREAS,
Executive is currently employed by the Company; and
WHEREAS,
Executive and the Company have heretofore entered into that certain Employment
Agreement dated as of April 4, 2006 (“Original
Agreement”); and
WHEREAS,
the Company desires to continue to employ Executive in an executive capacity,
and Executive likewise desires to continue to be employed by the Company;
and
WHEREAS,
the Company and Executive desire to replace the Original Agreement with this
Agreement;
NOW,
THEREFORE, in consideration of (1) the Company’s agreement to grant to Executive
Five Hundred Thousand (500,000) stock options to purchase the Company’s common
shares under the Energy XXI Services, LLC 2006 Long-Term Incentive Plan
(“Grant”), such Grant to be made pursuant to the terms and conditions of the
Stock Option Agreement governing the Grant and subject to the prior approval of
the Grant by the Company’s Remuneration Committee, and (2) the mutual promises,
covenants, representations, obligations and agreements contained herein, and for
other valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
1. Employment-at-will. Company
agrees to employ Executive, and Executive hereby agrees to be employed by
Company. Employment of Executive shall be at will and may be terminated by
either party on the terms and conditions set forth in this
Agreement.
2. Term of
Employment. Subject to the provisions for termination provided
in the Agreement, the term of this Agreement (the “Term”)
shall commence on the Effective Date and shall continue through the third
anniversary of the Effective Date. The Term shall be automatically
renewed and extended for a period of thirty-six (36) months commencing on
each successive day after the Effective Date.
3. Executive’s
Duties.
(a) Positions.
During the Term, Executive shall serve as President and Chief Operating Officer
of Company (and/or in such other positions as the parties mutually may agree),
with such customary duties and responsibilities as may from time to time be
assigned to him by the Company or the Chief Executive Officer, provided that
such duties are at all times consistent with the duties of such position.
Executive shall report directly to the Chief Executive Officer. As a
part of his existing duties Executive currently serves as a Director on the
Company’s Board of Directors (“Board”). The
Company and the Board will use best efforts to maintain Executive’s role as a
Director during the term of this Agreement. Executive agrees to serve
without additional compensation, if elected or appointed thereto, in one or more
offices or as a director of any of the Company’s Affiliates. For
purposes of this Agreement, the term “Affiliate”
shall mean any entity which owns or controls, is owned or controlled by, or is
under common ownership or control with, the Company. Executive agrees
to serve in the positions referred to herein and to perform all duties relating
thereto diligently and to the best of his ability.
(b) Other Interests.
Executive agrees, during the period of his employment by the Company, to devote
his primary business time, energy and best efforts to the business and affairs
of the Company and its Affiliates and not to engage, directly or indirectly, in
any other business or businesses, whether or not similar to that of the Company,
except with the consent of the Board. The foregoing notwithstanding,
the parties recognize and agree that Executive may engage in personal
investments and other corporate, civic and charitable activities that do not
conflict with the business and affairs of the Company or interfere with
Executive’s performance of his duties hereunder without the necessity of
obtaining the consent of the Board, provided, however, that Executive agrees
that if the Board determines that continued service with one or more of these
entities is inconsistent with Executive’s duties hereunder and gives written
notice of such to Executive, Executive will resign from such
position(s).
(c) Duty of Loyalty.
Executive acknowledges and agrees that Executive owes a fiduciary duty of
loyalty, fidelity, and allegiance to use his reasonable best efforts to act at
all times in the best interests of the Company. In keeping with these
duties, Executive shall make full disclosure to the Company of all business
opportunities pertaining to the Company’s business and shall not appropriate for
Executive’s own benefit business opportunities concerning the subject matter of
the fiduciary relationship.
4. Compensation.
(a) Base Compensation.
For services rendered by Executive under this Agreement, Company shall pay to
Executive a minimum base salary (“Base
Compensation”) of $490,000 per annum payable in accordance with Company’s
customary payroll practice for its senior executive officers. The
amount of Base Compensation shall be reviewed periodically by the Remuneration
Committee of the Board (the “Committee”)
and may be increased from time to time as the Committee may deem appropriate.
References in this Agreement to Base Compensation shall refer to annual base
salary so increased. Base Compensation, as in effect at any time, may
not be decreased without the prior written consent of Executive.
(b) Annual Bonus. In
addition to his Base Compensation, Executive shall be eligible to receive each
year during the Term, a cash incentive payment (“Bonus”)
in an amount determined by the Committee based on Executive’s individual
performance, the performance of Company and performance goals established by the
Committee. The Target Bonus shall be an amount equal to 100% of
Executive’s Base Compensation in effect at the time the Bonus is determined by
the Committee (“Target
Bonus”). Such Bonus, if any, shall be paid not later than the
fifteenth day of the second calendar month following the the last day of
the Company’s fiscal year in which the Bonus was earned ends.
(c) Equity Compensation.
During this Agreement, Executive shall be eligible to participate in any equity
compensation arrangement or plan offered by the Company to senior executives on
such terms and conditions as the Committee of the Board shall
determine. Nothing herein shall be construed to give Executive any
rights to any amount or type of awards, or rights as a shareholder pursuant to
any such plan, grant or award except as provided in such award or grant to
Executive provided in writing and authorized by the Committee of the
Board.
5. Other Benefits.
(a)
During this Agreement, Executive shall be entitled to participate in all
incentive compensation plans and to receive all fringe benefits and perquisites
offered by Company to any of its senior executive officers, including, without
limitation, participation in the various health, retirement, life insurance,
short-term and long-term disability insurance, parking and other executive
benefit plans or programs provided to the executives of Company in general,
subject to the regular eligibility requirements with respect to each of such
benefit plans or programs, and such other benefits or perquisites as may be
approved by the Committee during the Term, all on a basis at least as favorable
to Executive as may be provided to similarly situated senior executive officers
of Company. Executive shall be entitled to take appropriate and
reasonable annual vacation time provided that such vacation time does not
interfere with his duties hereunder. Company shall reimburse
Executive monthly for country or golf and luncheon club dues and one club
initiation fee.
(b) Business
Expenses. Company shall reimburse Executive for all reasonable
business expenses incurred by Executive in the performance of his duties, which
expenses will be subject to the oversight of Company’s Audit Committee of the
Board in the normal course of business and will be compliant with the applicable
Reimbursement Plan (as defined below) of the Company. It is
understood that Executive is authorized to incur reasonable business expenses
for promoting the business of Company, including reasonable expenditures for
travel, lodging, meals and client or business associate
entertainment. Request for reimbursement for such expenses must be
accompanied by appropriate documentation.
(c) Automobile. The
Company shall provide Executive with an automobile (or an automobile allowance)
that is determined by the Committee or the Board to be appropriate for the needs
and requirements of Executive’s employment, and the Company shall reimburse
Executive for, or pay on behalf of Executive, reasonable and appropriate
expenses incurred by Executive for maintaining and operating such automobile.
Such reimbursements shall comply with all requirements of the applicable
Reimbursement Plan (as defined below) of the Company. Such automobile
shall be available to Executive and his spouse for personal use.
(d) Life
Insurance. During Executive’s employment hereunder, the
Company shall maintain one or more policies of life insurance on the life of
Executive providing an aggregate death benefit in an amount not less than $3
million (the “Minimum
Death Benefit”). Executive shall have the right to designate
the beneficiary or beneficiaries of the death benefit payable pursuant to such
policy or policies up to an aggregate death benefit in an amount equal to the
Minimum Death Benefit. The provisions of this Section can be
satisfied in whole or in part by any group life insurance policy provided by the
Company in accordance with this Section. Executive shall (i) furnish
any and all information reasonably requested by the Company or the insurer to
facilitate the issuance of the life insurance policy or policies described in
this Section or any adjustment to any such policy, and (ii) take such physical
examinations as the Company or the insurer deems necessary. If
Executive refuses to cooperate or makes any material misstatement of information
or nondisclosure of medical history, then the Company shall have no further
obligation to provide the benefit described in this Section.
6. Termination and Effect on
Compensation.
(a) Resignation by
Executive.
(i)
Executive may terminate his employment under this Agreement and resign his
position(s) with the Company at any time, for any reason whatsoever, or for no
reason, in Executive’s sole discretion, by delivering a Notice of Termination
(defined in Section 6(e) below). In the event of such termination,
except as otherwise provided below, Executive shall not be entitled to further
compensation pursuant to this Agreement except as may be provided by the terms
of any benefit plans of Company in which Executive may be a participant, and the
terms of any outstanding equity grants, and for salary accrued but unpaid
through the Date of Termination (defined in Section 6(f) below) and
reimbursement of business expenses properly incurred but unreimbursed (to the
extent reimbursable) prior to Date of Termination.
(ii)
Notwithstanding the provisions of this Section 6(a)(i), in the event that
Executive terminates this Agreement by resigning for Good Reason (defined in
Section 6(j) below), (A) the Company shall pay Executive immediately upon
the Date of Termination a lump sum equal to three (3) times the sum
of the Base Compensation and the Target Bonus; (B) for the 36-month period
after the Date of Termination, Company shall continue to
cover Executive (and Executive’s dependents) in the medical plan
sponsored by Company (or any successor) for its executives, provided Executive
timely remits to Company the applicable monthly COBRA premium (less the COBRA
administrative surcharge) for such continued coverage; and (C) Company
shall reimburse Executive for any medical premium expenses incurred by Executive
under (B) within 30 days after the date of such payment by Executive and in
compliance with Treasury Regulation § 1.409A-3(i)(1)(iv) with regard to medical
benefits.
(b) Death of Executive.
If Executive dies during the term of this Agreement, then the Company will be
obligated to continue for twelve (12) months after the Date of Termination
(defined in Section 6(f) below) to pay the Base Salary payments under Section
4(a) of this Agreement. The Company may thereafter terminate this
Agreement without compensation to Executive’s estate except to the extent this
Agreement or any plan or arrangement of the Company provides for vested benefits
or continuation of benefits beyond termination of Executive’s
employment.
(c) Disability of
Executive. Except as provided in Section 6(d)(iii), if
Executive shall have been absent from the full-time performance of Executive’s
duties with Company for 180 business days during any twelve-month period as a
result of Executive’s incapacity due to accident, physical or mental illness, or
other circumstance which renders him mentally or physically incapable of
performing the duties and services required of him hereunder on a full-time
basis as determined by Executive’s physician (“Disability”),
Executive’s employment may be terminated by Company for
Disability. If Executive’s employment is terminated for Disability,
Executive shall be entitled to the compensation and benefits provided in
Section 6(d)(i) hereof.
(d) Other
Terminations.
(i) By Company for Reason Other
Than Cause. Company may terminate this Agreement and
Executive’s employment for any reason whatsoever, or for no reason, in the
Board’s sole discretion upon Notice of Termination (as defined in Section 6(e)
below). For purposes of this Agreement, acceptance by the Company of
Executive’s resignation upon request or by mutual agreement shall be deemed to
be a termination by the Company. Except as otherwise provided below,
in the event that Executive’s employment is terminated by Company for any reason
other than Cause (defined in Section 6(d)(v) below), then in addition to any
compensation or benefits to which Executive may be entitled through the Date of
Termination (as defined in Section 6(f) below): (A) Company shall pay
Executive immediately upon the Date of Termination a lump sum equal
to three (3) times the sum of the Base Compensation and the Target Bonus;
(B) for the 36-month period after the Date of Termination, Company shall
continue to cover Executive (and Executive’s dependents) in the
medical plan sponsored by Company (or any successor) for its executives,
provided Executive timely remits to Company the applicable monthly COBRA premium
(less the COBRA administrative surcharge) for such continued coverage; and
(C) Company shall reimburse Executive for any medical premium expenses
incurred by Executive under (B) within 30 days after the date of such
payment by Executive.
(ii)
By Company or
Executive Following Material Change in Management. If
(A) Xxxx X. Xxxxxxxx, Xx. ceases to be the Company’s Chief Executive
Officer and Executive is not offered the position of Chief Executive Officer,
with Executive’s compensation being commensurate with the compensation for the
position of Chief Executive Officer and Executive resigns within six
(6) months of (A) above, , then in addition to any compensation or
benefits to which Executive may be entitled through the Date of Termination
(X) Company shall pay Executive immediately upon the Date of
Termination a lump sum equal to two (2) times the sum of the Base
Compensation and the Target Bonus; (Y) for the 24-month period after the
Date of Termination, Company shall continue to cover Executive (and Executive’s
dependents) in the medical plan sponsored by Company (or any successor) for its
executives, provided Executive timely remits to Company the applicable monthly
COBRA premium (less the COBRA administrative surcharge) for such continued
coverage; and (Z) Company shall reimburse Executive for any medical premium
expenses incurred by Executive under (Y) within 30 days after the date of
such payment by Executive.
(iii)
By Company or
Executive Following a Change in Control. Except as set forth
in Section 6(d)(iv) below, if within a one-year period following a Change
in Control (defined in Section 6(i) below), Executive resigns or is terminated
for any reason, then in addition to any compensation or benefits to which
Executive may be entitled through the Date of Termination (A) Company shall
pay Executive immediately upon Date of Termination a lump sum equal to three
(3) times the sum of the Base Compensation and the Target Bonus;
(B) for the 36-month period after the Date of Termination, Company shall
continue to cover the Executive (and Executive’s dependents) in the medical plan
sponsored by Company (or any successor) for its executives, provided Executive
timely remits to Company the applicable monthly COBRA premium (less the COBRA
administrative surcharge) for such continued coverage; and (C) Company
shall reimburse Executive for any medical premium expenses incurred by Executive
under (B) within 30 days after the date of such payment by
Executive.
(iv)
Notwithstanding the provision of Section 6(d)(iii) above, if following a Change
in Control, (A) the surviving entity requests Executive to remain employed
by the Company, acknowledged by surviving entity expressly assuming and agreeing
in writing to perform this Agreement, (B) Xxxx X. Xxxxxxxx, Xx. is the
Chief Executive Officer and/or Chairman of the Board of the surviving entity;
and (C) Executive continues to report directly to Xxxx X. Xxxxxxxx, Xx.,
then Executive may not resign under Section 6(d)(iii) until six (6) months
after the date of the Change in Control.
(v) By Company for
Cause. Notwithstanding the foregoing provisions of this
Section 6, in the event Executive is terminated because of Cause, Company
shall have no obligations pursuant to this Agreement after the Date of
Termination other than for salary accrued but unpaid through the Date of
Termination (defined in Section 6(f) below) and reimbursement of business
expenses properly incurred but unreimbursed (to the extent reimbursable) prior
to Date of Termination. For purposes herein, “Cause”
means (A) Executive’s gross negligence, gross neglect or willful
misconduct in the performance of the duties required hereunder, (B) Executive’s
commission of a felony that results in a material adverse effect on the Company,
or (C) Executive’s material breach of any material provision of this
Agreement. Notwithstanding the foregoing, prior to any termination
for Cause under clauses (A) or (C) of the preceding sentence,
(X) Company must provide Executive with reasonable notice detailing the
failure or conduct which the Chief Executive Officer believes to constitute
Cause, (Y) Company must provide Executive a reasonable opportunity to cure
such failure or conduct, and (Z) after such notice and an opportunity to
cure, the Chief Executive Officer and the Committee must reasonably determine
that Executive has not cured such failure or conduct. Executive shall
not be deemed to have been terminated for Cause unless and until Executive shall
have been provided an opportunity to be heard in person by the Committee (with
the assistance of Executive’s counsel if Executive so desires) on at least five
business days’ advance notice, and the Committee must unanimously approve the
termination of Executive for Cause.
(vi) If
Executive is a “specified employee” (as defined within Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) and the accompanying
regulations to Section 409A of the Code, the “Nonqualified Deferred Compensation
Rules”) at the time that Executive incurs a “separation from service” (as
defined in the Nonqualified Deferred Compensation Rules), any applicable lump
sum payment described in Sections 6(a)(ii), 6(d)(i), 6(d)(ii), or 6(d)(iii)
shall not be in accordance with the time periods described in the applicable
Sections, but shall be delayed for a period of six months. Any such
lump sum payment which Executive is entitled to but that shall be delayed
pursuant to the preceding sentence shall be contributed to the trustee of a
“rabbi” trust (the “Trust”),
which is an unfunded arrangement that will be designed to comply with Revenue
Procedure 92-64. Such amounts that would otherwise be payable upon
separation from service shall be held by the trustee pursuant to the terms of
such Trust and paid to Executive as of the earlier of: (1) the first day of
the seventh month following Executive’s separation from service; or
(2) Executive’s date of death. Such amounts (including any such amounts
that would otherwise be payable in installments commencing on separation from
service) shall be accumulated and paid in a lump sum with interest (based on the
“prime rate” as published in the Wall Street Journal, plus one (1) percent)
on the date that is the earlier of (1) or (2) above, unless such day
is not a business day, in which case the business day immediately prior to such
date in (1) or (2) above shall be the date the prime rate is determined, and
shall be paid in installments (to the extent applicable)
thereafter.
(vii) All
reimbursements and in-kind benefits provided pursuant to this Agreement shall be
made in accordance with Treasury Regulation Section 1.409A-3(i)(l)(iv) such that
any reimbursements or in-kind benefits will be deemed payable at a specified
time or on a fixed schedule relative to a permissible payment
event. Specifically, (1) the amounts reimbursed and in-kind benefits
under this Agreement, other than with respect to medical benefits provided under
this Section 6, during Executive’s taxable year may not affect the amounts
reimbursed or in-kind benefits provided in any other taxable year, (2) the
reimbursement of an eligible expense shall be made on or before the last day of
Executive’s taxable year following the taxable year in which the expense was
incurred, (3) the right to reimbursement or an in-kind benefit is not subject to
liquidation or exchange for another benefit, and (4) any expenses
reimbursed/in-kind benefits provided under Sections 6(d)(i), 6(d)(ii) and
6(d)(iii) hereof will not affect the expenses eligible for
reimbursement/in-kind benefits provided in any other year (any such
reimbursement or in-kind benefit arrangement to be referred to herein as a
“Reimbursement
Plan”).
(e) Notice of
Termination. Any purported termination of Executive’s employment by
Company or by Executive and any purported termination of this Agreement shall be
communicated by written notice of termination (“Notice of
Termination”) to the other party hereto in accordance with
Section 10 hereof. Notice of Termination shall include the effective Date
of Termination (defined in Section 6(f) below) of this Agreement. Any
Notice of Termination shall be deemed to also be Executive’s resignation as
director and/or officer of any Affiliate of the Company. Executive
agrees to execute any and all documentation of such resignations upon request by
the Company, but he shall be treated for all purposes as having so resigned upon
the Date of Termination, regardless of when or whether he executes any such
documentation.
(f) Date of Termination.
“Date of
Termination” shall mean in the case of Executive’s death, his date of
death, and in all other cases, the date specified in the Notice of Termination
as the effective date on which this Agreement shall be terminated, provided that
for purposes of determining the date of payment pursuant to Executive’s
termination for any reason shall be the date of Executive’s separation of
service in accordance with Treasury Regulation 1.409A-1(h).
(g) No Duty to Mitigate.
Executive shall not be required to mitigate the amount of any payment or benefit
provided for in this Agreement by seeking other employment or otherwise, nor,
except as provided in Section 6(k), shall the amount of any payment or
benefit provided for in this Agreement be reduced by any compensation or benefit
earned by Executive as a result of employment by another employer,
self-employment earnings, by retirement benefits, by offset against any amount
claimed to be owing by Executive to Company, or otherwise.
(h) Full Tax Gross-Up of
Payments. In the event that any payment, award, benefit or distribution
(or any acceleration of any payment, award, benefit or distribution) made or
provided to or for the benefit of Executive in connection with this Agreement or
Executive’s employment with Company or the termination thereof (the “Payments”)
is determined to be subject to any additional tax imposed by Section 4999
or 409A of the Code or any interest or penalties with respect to such additional
taxes (such additional taxes, together with any such interest and penalties, are
collectively referred to as the “Excise
Taxes”), then Executive shall be entitled to receive an additional
payment (a “Gross-Up
Payment”) from Company such that the net amount received by Executive
after paying any applicable Excise Taxes and any federal, state or local income
or FICA taxes on such Gross-Up Payment, shall be equal to the amount Executive
would have received if such Excise Taxes were not applicable to the
Payments.
For
purposes of determining whether any of the Payments will be subject to the
Excise Taxes and the amount of such Excise Taxes, (i) all of the Payments
shall be treated as “parachute payments” (within the meaning of
Section 280G(b)(2) of the Code) unless, in the opinion of tax counsel
reasonably acceptable to Executive (“Tax
Counsel”), such payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of Section 280G(b)(4)(A)
of the Code; (ii) all “excess parachute payments” within the meaning of
Section 280G(b)(1) of the Code shall be treated as subject to the Excise
Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in
excess of the base amount (as the term “base amount” is defined in
Section 280G(b)(3) of the Code) allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax; (iii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Tax Counsel in accordance with the principles of Sections 280G(d) and 409A of
the Code; and (iv) all Payments shall be deemed subject to the Excise Tax
pursuant to section 409A of the Code unless, in the opinion of Tax Counsel, such
Payments are not subject to Excise Tax pursuant to section 409A. For purposes of
determining the amount of the Gross-Up Payment, Executive shall be deemed to pay
federal income tax at the highest marginal rate of federal income taxation in
the calendar year in which the Payments are made and State and local income
taxes at the highest marginal rate of taxation in the State and locality of
Executive’s residence on the date the Payments are made, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
State and local taxes.
In the
event that the Excise Taxes are determined by the IRS, on audit or otherwise, to
exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make another Gross-Up Payment in respect of such excess (plus any interest,
penalties or additions payable by Executive with respect to such excess) within
ten (10) business days following the date that Executive remits to the IRS
such additional Excise Taxes. Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Payments.
If a
termination of Executive’s employment shall have occurred, the Company shall
promptly reimburse to Executive all reasonable attorneys fees and expenses
necessarily incurred by Executive in disputing in good faith any issue with the
Company or its Affiliates pursuant to this Section 6(h) or asserting in good
faith any claim, demand or cause of action against the Company or its Affiliates
pursuant to this Section 6(h). Such reimbursements shall be made within ten
(10) business days after delivery of Executive’s written requests for
payment accompanied with such evidence of fees and expenses incurred as the
Company reasonably may require. This reimbursement obligation shall remain in
effect following Executive’s termination of employment for the applicable
statute of limitations period relating to any such claim, and the amount of
reimbursements hereunder during any calendar year shall not affect the expenses
eligible for reimbursement in any other year.
The
Gross-Up Payments provided to Executive shall be made not later than the tenth
(10th) business day following the date Executive remits to the IRS any such
Excise Taxes; provided, however, that if the amounts of such Gross-Up Payments
cannot be finally determined on or before the due date of any Excise Tax return
required as a result of the Payments, the Company shall pay to Executive within
10 days after the date Executive remits to the IRS such Excise Taxes, an
estimate of the Gross-Up Payments due, as determined in good faith by Executive
and the Company, the estimate to be of the minimum amount of such payments to
which Executive is clearly entitled. In the event that the amount of the
estimated payment exceeds the amount subsequently determined to have been due,
such excess shall constitute a non-interest bearing loan by the Company to
Executive, payable on the tenth (10th) business day after demand by the
Company. At the time the payments are made under this Agreement, the Company
shall provide Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations,
including, without limitations any opinions or other advice the Company has
received from Tax Counsel or other advisors or consultants and any such opinions
or advice which are in writing shall be attached to the statement.
Any
Gross-Up Payments hereunder will not affect the expenses eligible for
reimbursement provided in any other year and this Tax Gross-Up provision shall
remain in effect until the applicable 280G and 409A statute of limitations has
ended.
(i) Change in Control.
For purposes of this Agreement, a “Change in
Control” shall mean an occurrence of the following during the
Term:
(1) The
“acquisition” by any “Person”
(as the term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the “1934
Act”)) of “Beneficial
Ownership” (within the meaning of Rule 13d-3 promulgated under the 0000
Xxx) of any securities of Company which generally entitles the holder thereof to
vote for the election of directors of Company (the “Voting
Securities”) which, when added to the Voting Securities then “Beneficially
Owned” by such Person, would result in such Person either “Beneficially
Owning” fifty percent (50%) or more of the combined voting power of
Company’s then outstanding Voting Securities or having the ability to elect
fifty percent (50%) or more of Company’s directors; provided, however, that
for purposes of this paragraph (1) of Section 6(i), a Person shall not
be deemed to have made an acquisition of Voting Securities if such Person:
(a) becomes the Beneficial Owner of more than the permitted percentage of
Voting Securities solely as a result of open market acquisition of Voting
Securities by Company which, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares Beneficially Owned by
such Person; (b) is Company or any corporation or other Person of which a
majority of its voting power or its equity securities or equity interest is
owned directly or indirectly by Company (a “Controlled
Entity”); (c) acquires Voting Securities in connection with a “Non
Control Transaction” (as defined in paragraph (3) of this
Section 6(i)); or (d) becomes the Beneficial Owner of more than the
permitted percentage of Voting Securities as a result of a transaction approved
by a majority of the Incumbent Board (as defined in paragraph (2) below);
or
(2) The
individuals who, as of the Effective Date, are members of the Board (the “Incumbent
Board”), cease for any reason to constitute at least a majority of the
Board; provided, however, that if either the election of any new director or the
nomination for election of any new director by Company’s stockholders was
approved by a vote of at least a majority of the Incumbent Board, such new
director shall be considered as a member of the Incumbent Board; provided
further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened “Election
Contest” (as described in Rule 14a-11 promulgated under the 0000 Xxx) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board (a “Proxy
Contest”) including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or
(3) The
consummation of a merger, consolidation or reorganization involving Company (a
“Business
Combination”), unless (1) the stockholders of Company, immediately
before the Business Combination, own, directly or indirectly immediately
following the Business Combination, at least fifty percent (50%) of the
combined voting power of the outstanding voting securities of the corporation
resulting from the Business Combination (the “Surviving
Corporation”) in substantially the same proportion as their ownership of
the Voting Securities immediately before the Business Combination, and
(2) the individuals who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for the Business Combination
constitute at least a majority of the members of the Board of Directors of the
Surviving Corporation, and (3) no Person (other than (x) Company or
any Controlled Entity, (y) a trustee or other fiduciary holding securities
under one or more Executive benefit plans or arrangements (or any trust forming
a part thereof) maintained by Company, the Surviving Corporation or any
Controlled Entity, or (z) any Person who, immediately prior to the Business
Combination, had Beneficial Ownership of fifty percent (50%) or more of the
then outstanding Voting Securities) has Beneficial Ownership of fifty percent
(50%) or more of the combined voting power of the Surviving Corporation’s
then outstanding voting securities (a Business Combination described in clauses
(1), (2) and (3) of this paragraph shall be referred to as a “Non-Control
Transaction”);
(4) A
complete liquidation or dissolution of Company; or
(5) The
sale or other disposition of all or substantially all of the assets of Company
to any Person (other than a transfer to a Controlled Entity).
A Change
in Control shall not be deemed to occur solely because fifty percent
(50%) or more of the then outstanding Voting Securities is Beneficially
Owned by (x) a trustee or other fiduciary holding securities under one or
more executive benefit plans or arrangements (or any trust forming a part
thereof) maintained by Company or any Controlled Entity or (y) any
corporation which, immediately prior to its acquisition of such interest, is
owned directly or indirectly by the stockholders of Company in substantially the
same proportion as their ownership of stock in Company immediately prior to such
acquisition.
Any event
that would otherwise constitute a Change in Control shall not be deemed to be a
Change in Control if (i) the Incumbent Board continues to constitute a
majority of the Board of the Company (or of the Surviving Corporation
(if not the Company) and of any and all resulting parent entity(ies) in a
Business Combination ) (ii) Xxxx X. Xxxxxxxx, Xx. continues to
serve as Chairman of the Board and/or Chief Executive Officer of the Company (or
of the Surviving Corporation (if not the Company) and of any and all resulting
parent entity(ies) in a Business Combination), (iii) any successor entity of the
Company, if any, agrees in writing to expressly assume and agree to perform this
Agreement, as required by Section 12 of this Agreement, and (iv) Executive
maintains his same position of employment and reporting relationship (or is
offered the position of Chief Executive Officer, with Executive’s compensation
being commensurate with the compensation for the position of Chief Executive
Officer, in the event that Xxxx X. Xxxxxxxx, Xx. no longer holds that position)
with the Company (or of the Surviving Corporation (if not the Company) and of
any and all resulting parent entity(ies) in a Business Combination)
after such event for a period of at least three (3) years.
(j) Good
Reason. For purposes of this Agreement, “Good
Reason” shall mean (1) the material breach of any of the Company’s
obligations under this Agreement without Executive’s written consent or
(2) the occurrence of any of the following circumstances, without
Executive’s written consent:
(i) the
change of Executive’s title or the assignment to Executive of any duties that
materially adversely alter the nature or status of Executive’s office, title,
responsibilities, including reporting responsibilities, or action by the Company
that results in the material diminution of Executive’s position, duties or
authorities, from those in effect immediately prior to such change in title,
assignment or action;
(ii) the
failure by Company to continue in effect any compensation plan in which
Executive participates that is material to Executive’s total compensation unless
an equitable arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by Company to continue
Executive’s participation therein (or in such substitute or alternative plan) on
a basis not materially less favorable to Executive, unless any such failure to
continue in effect any compensation plan or participation relates to a
discontinuance of such plans or participation on a management-wide or
Company-wide basis;
(iii) the
taking of any action by Company which would directly or indirectly materially
reduce or deprive Executive of any material pension, welfare or fringe benefit
then enjoyed by Executive, unless such action relates to a discontinuance of
benefits on a management-wide or Company-wide basis;
(iv) the
relocation of Company’s principal executive offices, or the Company’s requiring
Executive to relocate, anywhere outside the greater Houston, Texas metropolitan
area, except for required travel on the Company’s business to an extent
substantially consistent with Executive’s obligations under this Agreement;
or
(v) the
Company’s material breach of any material provision of this
Agreement.
Executive
is required to provide notice to the Company of the existence of the conditions
described above in this Section 6(j)(i) through (v) within a period not to
exceed 90 days from the initial existence of the condition, upon the notice of
which the Company must be provided a period of at least 30 days during which it
may remedy the condition.
(k) Taxable Health Care Coverage
or Benefits. To the extent the health care coverage or
benefits received by Executive after termination are taxable to Executive,
Company shall make Executive “whole” on a net after tax basis by reimbursing
Executive for such amount no later than 10 days after such taxes are remitted by
Executive to the IRS; provided, however, that such coverage shall cease if
Executive obtains comparable replacement coverage (although Executive shall have
no obligation to pursue such coverage).
(l) Acceleration of Unvested
Awards. In the event of Executive’s termination or resignation
under the circumstances described in Sections 6(a)(ii), 6(b),
6(c), 6(d)(i), 6(d)(ii), 6(d)(iii) or 6(d)(iv), then all then
outstanding Company stock-based awards of Executive, other than the awards dated
the date of this Agreement (which shall be governed by the terms of agreement
with respect to such award), and all equity compensation described in
Section 4(c) shall become immediately exercisable and payable in full, as
the case may be, with any performance goals associated therewith being deemed to
have been achieved at the maximum levels and all restrictions removed with
respect thereto (including without limitation with respect to any options that
would otherwise vest in accordance with performance goals and any grants of
restricted stock and/or restricted stock units that shall have been granted
prior to the Effective Date).
(m) Reimbursements for
Expenses. Company shall reimburse Executive for business
expenses properly incurred prior to the Date of Termination, regardless of the
circumstances of termination, and in accordance with the Company’s Reimbursement
Plans.
7. Restrictive
Covenants.
(a) General. The parties
acknowledge that during the Term, Company may disclose to Executive or provide
Executive with access to trade secrets or confidential information (“Confidential
Information”) of Company or its Affiliates; and/or place Executive in a
position to develop business goodwill on behalf of Company or its Affiliates;
and/or entrust Executive with business opportunities of Company or its
Affiliates. As part of the consideration for the compensation and benefits to be
paid to Executive hereunder; to protect the trade secrets and Confidential
Information of the Company and its Affiliates that have been and will in the
future be disclosed or entrusted to Executive, the business good will of the
Company and its Affiliates that has been and will in the future be developed
in Executive, or the business opportunities that have been and will
in the future be disclosed or entrusted to Executive by the Company and its
Affiliates; and as an additional incentive for the Company to enter into this
Agreement, the Company and Executive agree to the following obligations relating
to unauthorized disclosures, non-competition and non-solicitation.
(b) Confidential Information;
Unauthorized Disclosure. Executive shall not, whether during the period
of his employment hereunder or thereafter, without the written consent of the
Board or a person authorized thereby, disclose to any person, other than an
executive of Company or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by Executive of his duties as an
executive of Company, any Confidential Information obtained by him while in the
employ of Company with respect to Company’s business, including but not limited
to technology, know-how, processes, maps, geological and geophysical data, other
proprietary information and any information whatsoever of a confidential nature,
the disclosure of which he knows or should know will be damaging to Company;
provided, however, that Confidential Information shall not include any
information known generally to the public (other than as a result of
unauthorized disclosure by Executive) or any information
which Executive may be required to disclose by any applicable law,
order, or judicial or administrative proceeding. In no event shall an
asserted violation of the provisions of this paragraph constitute a basis for
deferring or withholding any amounts payable to Executive under this
Agreement. Within fourteen (14) days after the termination of
Executive’s employment for any reason, Executive shall return to Company all
documents and other tangible items containing Company information which are in
Executive’s possession, custody or control. Executive agrees that all
Confidential Information of the Company exclusively belongs to the Company, and
that any work of authorship relating to the Company’s business, products or
services, whether such work is created solely by Executive or jointly with
others, and whether or not such work is Confidential Information, shall be
deemed exclusively belonging to the Company.
(c) Non-Competition.
During the Term and for a period of one (1) year thereafter, Executive shall not
in any geographic area or market where the Company or any of its Affiliates are
conducting any Business (defined below) or have during the previous 12 months
conducted such Business, directly or indirectly for Executive or for others,
engage in or become interested financially in as a principal, executive,
partner, shareholder, agent, manager, owner, advisor, lender, guarantor of any
person engaged in any business substantially identical to the Business (defined
below); provided, however, that Executive may invest in stock, bonds or other
securities in any such business (without participating in such business) if:
(i)(A) such stock, bonds or other securities are listed on any United States
securities exchange or are publicly traded in an over the counter market and
(B) its investment does not exceed, in the case of any capital stock of any
one issuer, 5% of the issued and outstanding capital stock, or in the case of
bonds or other securities, 5% of the aggregate principal amount thereof issued
and outstanding, or (ii) such investment is completely passive and no
control or influence over the management or policies of such business is
exercised. The term “Business”
shall mean the exploration, development and production of crude petroleum and
natural gas. Notwithstanding the foregoing provisions of this Section 7(c),
Executive shall have no further obligations under this Section 7(c) in the
event of (1) a termination of Executive’s employment by Company without Cause,
(2) a termination of Executive’s employment pursuant to Section 6(d)(ii), (3) a
termination of Executive’s employment pursuant to Section 6(d)(iii) or (4)
Executive’s resignation for Good Reason.
(d) Non-Solicitation.
Executive undertakes toward Company and is obligated, during the Term and for a
period of one (1) year thereafter, in any geographic area or market where the
Company or any of its Affiliates are conducting any Business or have during the
previous 12 months conducted such Business, not to solicit or hire, directly or
indirectly for Executive or for others, in any manner whatsoever (except in
response to a general solicitation), in the capacity of executive, consultant or
in any other capacity whatsoever, one or more of the executives, directors or
officers or other persons (hereinafter collectively referred to as “Company
Executives”) who at the time of solicitation or hire, or in the 90 day
period prior thereto, are working full-time or part-time for Company or any of
its Affiliates and not to endeavor, directly or indirectly, in any manner
whatsoever, to encourage any of said Company executives to leave his or her job
with Company or any of its Affiliates and not to endeavor, directly or
indirectly, and in any manner whatsoever, to incite or induce any client of
Company or any of its Affiliates to terminate, in whole or in part,
its business relations with Company or any of its Affiliates.
(e) Enforcement and
Reformation. It is the desire and intent of the parties that
the provisions of this Section 7 shall be enforced to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any particular provision of this
Section 7 shall be adjudicated to be invalid or unenforceable, such
provision shall be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable. Such deletion shall apply only with
respect to the operation of such provisions of this Section 7 in the
particular jurisdiction in which such adjudication is made. In addition, if the
scope of any restriction contained in this Section 7 is too broad to permit
enforcement thereof to its fullest extent, then such restriction shall be
enforced to the maximum extent permitted by law, and Executive hereby consents
and agrees that such scope may be judicially modified in any proceeding brought
to enforce such restriction.
(f) Remedies. In the
event of a breach or threatened breach by Executive of the provisions of this
Section 7, Executive acknowledges that money damages would not be
sufficient remedy, and the Company shall be entitled to specific performance,
injunction and such other equitable relief as may be necessary or desirable to
enforce the restrictions contained herein. Nothing herein contained shall be
construed as prohibiting Company from pursuing any other remedies available for
such breach or threatened breach or any other breach of this
Agreement.
(g) Nondisparagement.
Executive and the Company and its Affiliates shall refrain from any criticisms
or disparaging comments about each other or in any way relating to Executive’s
employment or separation from employment; provided, however, that nothing in
this Agreement shall apply to or restrict in any way the communication of
information by the Company or any of its Affiliates or Executive to any state or
federal law enforcement agency or require notice to the Company or Executive
thereof, and none of Executive, the Company or any of its Affiliates
will be in breach of the covenant contained above solely by reason of testimony
or disclosure which is compelled by applicable law or regulation or process of
law. A violation or threatened violation of this prohibition may be enjoined by
the courts. The rights afforded under this provision are in addition to any and
all rights and remedies otherwise afforded by law.
8. Non-exclusivity of
Rights. Nothing in this Agreement shall prevent or limit
Executive’s continuing or future participation in any benefit, bonus, incentive
or other plan or program provided by Company or any of its Affiliates and for
which Executive may qualify, nor shall anything herein limit or otherwise
adversely affect such rights as Executive may have under any stock option or
other agreements with Company or any of its Affiliates.
9. Non-assignability by
Executive. The obligations of Executive hereunder are personal
and may not be assigned or delegated by him or transferred in any manner
whatsoever, nor are such obligations subject to involuntary alienation,
assignment or transfer, except by will or the laws of descent and
distribution.
10. Method of Notice. For the
purpose of this Agreement, notices and all other communications provided for in
the Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered, sent by overnight courier or by facsimile with
confirmation of receipt or on the third business day after being mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to Company at its principal office address and facsimile number,
directed to the attention of the Board with a copy to the Secretary of Company,
and to Executive at Executive’s residence address and facsimile number on the
records of Company or to such other address as either party may have furnished
to the other in writing in accordance herewith except that notice of change of
address shall be effective only upon receipt.
11. Validity. The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
12. Successors and Binding
Agreement. This Agreement shall be binding upon and inure to
the benefit of the Company and any successor of the Company (whether direct or
indirect, by purchase, merger, consolidation or otherwise), and this Agreement
shall inure to the benefit of and be enforceable by the Executive’s legal
representatives. The Company shall 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 successor by operation of law or otherwise and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement.
13. Indemnification. The
Company agrees to indemnify the Executive with respect to any acts or omissions
he may commit during the period during which he is an officer, director and/or
employee of the Company or any Affiliate thereof, and to provide him with
coverage under any directors’ and officers’ liability insurance policies, in
each case on terms not less favorable than those provided to any of its other
directors and officers as in effect from time to time.
14. Withholding. Anything
to the contrary notwithstanding, all payments required to be made by the Company
hereunder to Executive, his spouse, his estate or beneficiaries, shall be
subject to withholding of such amounts relating to taxes as the Company may
reasonably determine it should withhold pursuant to any applicable law or
regulation. In lieu of withholding such amounts in whole or in part, the Company
may, in its sole discretion, accept other provisions for payment of taxes as
required by law, provided it is satisfied that all requirements of law affecting
its responsibilities to withhold such taxes have been satisfied.
15. Legal Fees. 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 by the Company, the Executive or others of the validity or
enforceability of, or liability or entitlement under, any provision of this
Agreement or any guarantee of performance thereof (whether such contest is
between the Company and the Executive or between either of them and any third
party, and including as a result of any contest by the Executive about the
amount of any payment pursuant to this Agreement), plus in each case interest on
any delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code. The Company’s obligations under this paragraph shall
apply without regard to the outcome of any such contest; provided, however, that
if such contest relates to a payment, act or omission that occurred prior to a
Change in Control, then the Company’s obligations under this paragraph shall
apply only if the Executive obtains any money judgment or otherwise prevails
with respect to any such contest.
16. Waiver and
Modification. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by Executive and such officer as may be specifically
authorized by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or in compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
17. Applicable
Law. This Agreement is entered into under, and the validity,
interpretation, construction and performance of this Agreement shall be governed
by, the laws of the State of Texas.
18. Counterparts. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed to be an original but all of which together will constitute one and the
same instrument.
19. Entire
Agreement. Except as provided in the written benefit plans and
programs and agreements of the Company in effect during the Term of this
Agreement, this Agreement is an integration of the parties’ agreement; no
agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement; and this Agreement contains the
entire understanding of the parties in respect of the subject matter and
supersedes and replaces in full all prior written or oral agreements and
understandings between the parties with respect to such subject
matters. Without limiting the scope of the preceding sentence, all
prior understandings and agreements among the parties hereto relating to the
subject matter hereof (including, without limitation, the Original Agreement)
are hereby null and void and of no further force and effect.
20. Representation by
Executive. Executive hereby represents and warrants to the
Company that, as of the Effective Date, he is not a party to any employment or
other agreement with any third party which would preclude him from continuing
employment with the Company and performing his obligations under this
Agreement.
21. Severability. If a
court of competent jurisdiction determines that any provision of this Agreement
is invalid or unenforceable, then the invalidity or unenforceability of that
provision shall not affect the validity or enforceability of any other provision
of this Agreement and all other provisions shall remain in full force and
effect.
22. Headings. The
paragraph headings have been inserted for purposes of convenience and shall not
be used for interpretive purposes.
23. Gender and
Plurals. Wherever the context so requires, the masculine
gender includes the feminine or neuter, and the singular number includes the
plural and conversely.
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SIGNATURE PAGE FOLLOWS -
IN
WITNESS WHEREOF, the parties have executed this Agreement as of September 10,
2008, effective for all purposes as provided above on the Effective
Date.
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ENERGY
XXI (BERMUDA) LIMITED
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By:
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Xxxxx
X. Xxxxxxxx
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Director
and Chairman of the
Remuneration
Committee
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EXECUTIVE
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Xxxxxx
X. Xxxxx
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