ENERGY XXI (BERMUDA) LIMITED EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.3
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).
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(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.
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(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.
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(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.
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(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.
5
(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.
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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”);
7
(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;
8
(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.
9
(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.
10
(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.
11
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 -
12
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.
|
ENERGY
XXI (BERMUDA) LIMITED
|
||
|
By:
|
|
/s/
Xxxxx X. Xxxxxxxx
|
|
|
Xxxxx
X. Xxxxxxxx
|
|
|
|
Director
and Chairman of the
Remuneration
Committee
|
|
|
EXECUTIVE
|
|
/s/
Xxxxxx X. Xxxxx
|
|
Xxxxxx
X. Xxxxx
|
13
