1
EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Agreement is entered into between Cliffs Drilling
Company, a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxxx (the
"Executive") on the 1st day of December, 1998.
The Company has determined that it is in its best interests
and those of its shareholders to assure that the Company will have the services
of the Executive and to provide the Executive with compensation and benefit
arrangements which are competitive with those of other corporations.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS;
1. Employment Period. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to be employed by the Company, in
accordance with the terms and provisions of this Agreement, for the period
commencing on the date hereof (the "the Effective Date") and ending on the third
anniversary of such date (the "Employment Period").
2. Terms of Employment. (a) Position and Duties. (i) During
the Employment Period, (A) the Executive's position, authority, duties and
responsibilities shall be at least commensurate in all material respects with
and include status as President of the Company, and (B) the Executive's services
shall be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office of the Company located in Houston,
Texas which is the principal office of the Company or one of its affiliated
companies. The Company is a wholly-owned subsidiary of R&B Falcon Corporation
("Parent") which operates through subsidiaries. Executive agrees that if
requested by Parent or Company, he shall serve in comparable positions of other
subsidiaries of Parent, in addition to or in lieu of serving as President of
Company, provided his overall authority, duties and responsibilities shall not
be materially diminished.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote substantially full attention and time during normal
business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive hereunder,
to use the Executive's best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not materially interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement.
(b) Compensation. (i) Base Salary. During the Employment
Period, the Executive shall receive an annual base salary of not less than
$450,000 ("Annual Base Salary"), which shall be paid on a monthly basis. During
the Employment Period, the Annual Base Salary shall be reviewed at least
annually and shall be increased at any time and from time to time as may
2
be determined by the Board, based on the Executive's performance of his position
and responsibilities (to be measured in a fair and objective manner). It may
also be decreased by the Board as a part of Company wide salary reduction
program applicable to all executives and employees generally as a result of
financial losses experienced by the Company. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary shall not be reduced after any such increase
(except as provided in this Section 2(b)(i)), and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so increased or
decreased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans that are tax qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended ("Code"), applicable
generally to other executives of the Company and its affiliated companies.
(iii) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, vision, disability, salary continuance, group life and supplemental
group life, accidental death and travel accident insurance plans and programs)
to the extent applicable generally to other executives of the Company and its
affiliated companies.
(iv) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the policies, practices
and procedures of the Company and its affiliated companies.
(v) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the plans,
policies, programs and practices of the Company and its affiliated companies.
(vi) Notwithstanding the foregoing, as provided in
the Agreement and Plan of Merger dated August 21, 1998 among Parent, RBF Cliffs
Acquisition Corp., and Company, Executive shall participate in the employee
benefit plans of the Company as in existence prior to the date hereof until such
plans are merged with those of Parent.
3. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 11(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the
2
3
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company on a
full-time basis for 180 consecutive business days as a result of incapacity due
to mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement as to
acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) chronic alcoholism or controlled substance abuse, as
determined by a doctor mutually acceptable to the Company and
the Executive, and continuing failure by the Executive to
commence and pursue with due diligence appropriate treatment
for same in accordance with such doctor's recommendations;
(ii) a deliberate act of proven fraud on the part of the Executive
having a material adverse impact on the business or
consolidated financial condition or results of operations of
the Company and its subsidiaries;
(iii) a deliberate and continuing failure by the Executive to comply
with the applicable laws and regulations having a material
adverse impact on the business or consolidated financial
condition or results of operations of the Company and its
subsidiaries; or
(iv) conviction of the Executive of a criminal offense constituting
a felony.
(c) Good Reason. The Executive's employment may be terminated
during the Employment Period by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean
(i) the assignment to the Executive of any duties
materially inconsistent in any respect with the Executive's authority,
duties or responsibilities as contemplated by Section 2 of this
Agreement, or any other action by the Company which results in a
material diminution in such authority, duties or responsibilities
(excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive);
(ii) any failure by the Company to comply with any of
the provisions of Section 2(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than that described in Section
2(a)(i)(B) hereof;
3
4
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 9 of this Agreement, provided that such successor has
received, at least ten days prior to the giving of Notice of
Termination by the Executive, written notice from the Company or the
Executive of the requirements of Section 9 of the Agreement.
(d) Notice of Termination. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 10(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than
fifteen days after the giving of such notice). The failure by the Executive or
the Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company hereunder or preclude the Executive or the
Company from asserting such fact or circumstance in enforcing the Executive's or
the Company's right hereunder.
(e) Date of Termination. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
4. Obligations of the Company upon Termination.
(a) Good Reason; Other than for Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason:
(i) the Company shall pay or provide to or in respect of the
Executive the aggregate of the following amounts and benefits:
A. in a lump sum in cash within 30 days after the
Date of Termination the sum of (1) the Executive's Annual Base
Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the highest annual
bonus paid or accrued for the benefit of Executive during the
three year period preceding the
4
5
Date of Termination and (y) a fraction, the numerator of which
is the number of days since the date of the last bonus payment
through the Date of Termination, and the denominator of which
is 365 and (3) any compensation previously deferred or earned
by the Executive (together with any accrued interest or
earnings thereon), any unreimbursed expenses and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2) and (3)
shall be hereinafter referred to as the "Accrued
Obligations"); and
B. in a lump sum in cash within 30 days
after the Date of Termination the product of (i) the sum of
the highest Annual Base Salary and the highest annual bonus
which has been payable to the Executive within the past three
years (including such salary and bonus paid by a previous
employer which is a direct subsidiary of the Company as of the
date of this Agreement) for one year's service times (ii) a
fraction, (A) the numerator of which is the number of days
remaining in the Employment Period following the Date of
Termination and (B) the denominator of which is 365.
(ii) for the remainder of the Employment Period, or such
longer period as any plan, program, practice or policy may provide, the
Company shall continue benefits to the Executive and/or the Executive's
family at least equal to those which would have been provided to them
in accordance with the plans, programs, practices and policies
described in Section 2(b)(iii) of this Agreement if the Executive's
employment had not been terminated in accordance with the most
favorable plans, practices, programs or policies of the Company and its
affiliated companies as in effect and applicable generally to other
executives and their families on the Effective Date or, if more
favorable to the Executive, as in effect generally at any time
thereafter with respect to other executives of the Company and its
affiliated companies and their families (such continuation of such
benefits for the applicable period herein set forth shall be
hereinafter referred to as "Welfare Benefit Continuation"). [For
purposes of determining eligibility of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies and
for purposes of determining Vesting Service (as defined in the Reading
& Xxxxx Pension Plan) under the Reading & Xxxxx Pension Plan and the
Reading & Xxxxx Benefits Replacement Plan, the Executive shall be
considered to have remained employed until the end of the Employment
Period and to have retired on the last day of such period.]
(b) Death; Disability; Cause; Other than for Good Reason. If
the Executive's employment shall be terminated for Death, Disability or Cause
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive other than for Accrued Obligations and the timely
payment of reimbursement of expenses incurred by Executive under Section
2(b)(iv). If the Executive terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive, other than for Accrued Obligations and the
timely payment of reimbursement of expenses incurred by Executive under Section
2(b)(iv). In such case, all Accrued Obligations and reimbursement of expenses
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
5
6
5. Non-exclusivity of Rights. Except as provided in Section 4
of this Agreement, nothing in this Agreement shall prevent or limit the
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliated companies and for
which the Executive may qualify, nor shall anything herein limit or otherwise
affect such rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice or program or
contract or agreement except as explicitly modified by this Agreement.
6. Challenge to Validity. The Company agrees to pay promptly
as incurred, to the full extent permitted by law, all legal fees and expenses
which the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of any provision of this Agreement or any guarantee of
performance thereof, plus interest on any delayed payment at the Applicable
Federal Rate provided for in Section 7872(f)(2)(A) of the Code.
7. Certain Additional Payments by the Company. (a) Anything in
this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or for the benefit
of the Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 7) (a "Payment")
would be subject to the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Xxxxxx Xxxxxxxx & Co. (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change of Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to this
Section 7, shall be paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
6
7
determines that no Excise Tax is payable by the Executive, it shall furnish the
Executive with a written opinion that failure to report the Excise Tax on the
Executive's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 7(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claims by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than thirty days after the Executive
actually receives notice in writing of such claim and shall apprise the Company
of the nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 7(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in
7
8
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Executive to pay such claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section (c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 7(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
8. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
9. Successors. (a) This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
8
9
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
10. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without reference
to principles of conflict of laws. The captions of this Agreement are not part
of the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given if by the Executive to the Company by telecopy or
facsimile transmission at the telecommunications number set forth below and if
by either the Company or the Executive either by hand delivery to the other
party or by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Xxxxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
If to the Company:
R&B Falcon Corporation
000 Xxxxxxxxxxxx
Xxxxxxx, Xxxxx 00000
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
9
10
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to Section 3(c) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) This Agreement may be superseded by another written
agreement entered into between the Executive and Company on mutually agreeable
terms, provided such agreement expressly by its terms supersedes this Agreement.
However, an offer by the Company to enter into any such agreement with the
Executive shall not constitute an independent basis for the Executive to
terminate this Agreement for Good Reason.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board of Directors,
the Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
/s/ XXXXXXX X. XXXXXXX
------------------------------------
XXXXXXX X. XXXXXXX
CLIFFS DRILLING COMPANY
By /s/ XXXXXX X. XXXXXXX
---------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President--Finance
10
