EMPLOYMENT AGREEMENT
Exhibit 10.1
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into as of July 30, 2007 (the
“Effective Date”), by and between GREY WOLF, INC., a Texas corporation (the “Company”), and Xxxxx
X. Xxxxxxx (the “Executive”).
The parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company and Duties. The Company hereby agrees to employ the
Executive for a term commencing on the Effective Date and expiring at the end of the day on July
30, 2009 (such date, or later date to which this Agreement is extended in accordance with the terms
hereof, the “Termination Date”), unless earlier terminated as provided in Section 4 or unless
extended as provided herein (the “Term”). The Term shall be automatically extended commencing on
the Termination Date and on each Termination Date thereafter (each such date being a “Renewal
Date”), so as to terminate one (1) year from such Renewal Date, unless and until at least ninety
(90) days prior to a Renewal Date either party hereto gives written notice to the other that the
Term should not be further extended after the next Renewal Date, in which event the Termination
Date shall be the Renewal Date next following such notice. During the Term, the Executive shall
serve in the capacity of Executive Vice President and Chief Operating Officer of the Company, and
shall also serve in those offices and directorships of subsidiary corporations or entities of the
Company to which he may from time to time be appointed or elected. During the Term, the Executive
shall devote all reasonable efforts and all of his business time and services to the Company,
subject to the direction of the Board of Directors of the Company (the “Board”). The Executive
shall not engage in any other business activities except for passive investments as more
particularly described in subsection 3.1.1 below.
1.2 Acceptance of Employment by the Executive. The Executive hereby accepts such
employment and shall render the services and perform the duties described above.
2. Compensation and Other Benefits.
2.1 Annual Salary. The Company shall pay to the Executive an annual salary at a rate
of not less than Three Hundred Seventy-Five Thousand and No/100 ($375,000.00) per year (the “Annual
Salary”), subject to increase at the sole discretion of the Board. The Annual Salary shall be
payable in accordance with the payroll policies of the Company as from time to time in effect, but
in no event less frequently than once each month, less such deductions as shall be required to be
withheld by applicable law and regulations.
2.2 Bonuses. The Executive shall receive, at the sole discretion of the Board, an
incentive bonus with respect to the fiscal years ending during the term hereof (the “Incentive
Bonus”). If an Incentive Bonus is payable to the Executive for any year, the Incentive Bonus will
be paid between January 1 and March 15 of the calendar year immediately following the calendar year
to which the Incentive Bonus relates.
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2.3 Vacation Policy. The Executive shall be entitled to five (5) weeks of paid
vacation during each year of the Term.
2.4 Participation in Employee Benefit Plans. The Company agrees to permit the
Executive during the Term to participate in any group life, hospitalization or disability insurance
plan, health program, pension plan, similar benefit plan or other so called “fringe benefits” of
the Company (collectively, “Benefits”) which may be available to other executives of the Company on
terms no less favorable to the Executive than the terms offered to such other executives. The
Executive shall cooperate with the Company in applying for such coverage, including submitting to a
physical exam and providing all relevant health and personal data.
2.5 General Business Expenses. The Company shall pay or reimburse the Executive for
all expenses reasonably and necessarily incurred by the Executive during the Term in the
performance of the Executive’s services under this Agreement. Such payment shall be made upon
presentation of such documentation as the Company customarily requires of its senior executive
employees prior to making such payments or reimbursements.
2.6 Company Car and Cellular Telephone. The Company shall provide an automobile, of
the Executive’s choice, to be used by the Executive during the Term hereof or until his employment
hereunder is terminated. The purchase price of the automobile shall not exceed $50,000.00 (the
“Auto Allowance”); provided, however, the Auto Allowance shall be increased effective January 1,
2008 and on January 1 of each year thereafter during the Term by a percentage equal to the
percentage increase in the Consumer Price Index (Urban-Houston Metropolitan Area) for the previous
calendar year. If requested by the Executive, the Company will replace the automobile with a new
automobile no less frequently than every three (3) years during the Term hereof. The Company
shall, at its expense, pay any and all expenses associated with the operation of such company car,
including, but not limited to, collision and liability insurance, maintenance and repair costs,
replacement parts, tires, fuel and oil. The Executive may use the automobile for personal purposes
and the value of any such personal use shall be deemed to be additional compensation. The Company
shall also furnish the Executive with a cellular telephone of his choice and the Company shall pay
all charges in connection with the use thereof, other than charges for calls not related to the
Executive’s duties hereunder.
2.7 Certain Additional Payments by the Company.
2.7.1 Excise Tax; Gross-Up Payment. 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 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 2.7) (a “Payment”) would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (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
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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.
2.7.2 Accounting Firm Determinations. Subject to the provisions of Section 2.7.3, all
determinations required to be made under this Section 2.7, 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 KPMG, LLP (the “Accounting Firm”) which shall
provide detailed supporting calculations both to the Company and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting a 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 2.7, shall be paid by the Company to
the Executive within five (5) days of the receipt of the Accounting Firm’s determination. If the
Accounting Firm 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 2.7.3 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. Any Gross-Up payment as determined pursuant to this Section 2.7 shall be paid by
the Company to the Executive within five (5) days after receipt of the accounting firm’s
determination or, if earlier, by the last day of the calendar year following the calendar year in
which the excise tax is paid by the Executive.
2.7.3 Notification of Claims. 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 (30) 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 thirty
(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;
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(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 to effectively 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 2.7.3, 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 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.
2.7.4 Refund. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 2.7.3, 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 2.7.3) 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 2.7.3, 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 thirty (30) days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
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3. Non-Competition, Confidentiality and Company Property.
3.1 Covenants Against Competition. The Executive acknowledges that (i) the Company is
currently engaged in the business of owning, managing and operating onshore drilling and workover
rigs for its own account or for others which are contracted or hired for the purpose of drilling
and/or workover of oil or natural gas xxxxx (the “Company Business”); (ii) his work for the Company
will give him access to trade secrets of and confidential information concerning the Company; and
(iii) the agreements and covenants contained in this Agreement are essential to protect the
business and goodwill of the Company. Accordingly, the Executive covenants and agrees as follows:
3.1.1 Non-Compete. The Executive agrees that he shall not during the Restricted
Period (as hereinafter defined) within a two hundred (200) mile radius of any office maintained by
the Company within one year prior to the end of the Term, including, without limitation, the office
address specified from time to time pursuant to Section 7.2 hereof and any field offices, directly
or indirectly (except in the Executive’s capacity as an officer of the Company) (i) engage or
participate in the Company Business; or (ii) enter the employ of, or render any other services to,
any person engaged in the Company Business except as permitted hereunder. In addition, the
Executive agrees that he shall not during the Restrictive Period (as hereinafter defined) become
interested in any such person in any capacity, including, without limitation, as an individual,
partner, shareholder, lender, officer, director, principal, agent or trustee except as permitted
hereunder; provided, however, that the Executive may own, directly or indirectly, solely as an
investment, securities of any person traded on any national securities exchange or listed on the
National Association of Securities Dealers Automated Quotation System if the Executive is not a
controlling person of, or a member of a group which controls, such person and the Executive does
not, directly or indirectly, own five percent (5%) or more of any class of equity securities, or
securities convertible into or exercisable or exchangeable for five percent (5%) or more of any
class of equity securities, of such person. As used herein, the “Restricted Period” shall mean a
period commencing on the date hereof and terminating upon the first to occur of (a) the date on
which the Company terminates or is deemed to terminate the Executive’s employment without Cause (as
hereinafter defined), (b) the date the Executive terminates or is deemed to terminate his
employment pursuant to Section 4.6 hereof, or (c) the date of termination of this Agreement.
Notwithstanding the foregoing, if: (x) the Company shall have terminated the Executive’s
employment for Cause and such Cause in fact exists, the Restricted Period shall end one (1) year
following the termination of the Executive’s employment hereunder or (y) the Executive shall have
terminated his employment with the Company in breach of the terms of this Agreement, the Restricted
Period shall end six (6) months following the termination of Executive’s employment hereunder
unless Executive shall have been promoted to President of the Company, in which event the
Restricted Period shall end one (1) year following the termination of the Executive’s employment
hereunder.
3.1.2 Confidential Information. The Executive acknowledges that the Company has a
legitimate and continuing proprietary interest in the protection of its confidential information
and that it has invested substantial sums and will continue to invest substantial sums to develop,
maintain and protect confidential information. The Company agrees to provide the Executive access
to confidential information in conjunction with the Executive’s duties, including, without
limitation, information of a technical and business nature regarding the
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Company’s past, current or anticipated business that may encompass financial information,
financial figures, trade secrets, customer lists, details of client or consultant contracts,
pricing policies, operational methods, marketing plans or strategies, product development
techniques or plans, business acquisition plans, Company employee information, organizational
charts, new personnel acquisition plans, technical processes, designs and design projects,
inventions and research projects, ideas, discoveries, inventions, improvements, trade secrets,
design specifications, writings and other works of authorship. In exchange, as an independent
covenant, the Executive agrees not to make any unauthorized use, publication, or disclosure, during
or subsequent to his employment by the Company, of any information of a confidential or trade
secret nature, generated or acquired by him during the course of his employment, except to the
extent that the disclosure of such confidential information is necessary to fulfill his
responsibilities as an employee of the Company. The Executive understands that confidential
information and trade secrets include information not generally known by or available to the public
about or belonging to the Company, its divisions, subsidiaries, and related affiliates, or
belonging to other companies to whom the Company, its divisions, subsidiaries, and related
affiliates, may have an obligation to maintain information in confidence, and that authorization
for public disclosure may only be obtained through the Company’s written consent.
3.1.3 Property of the Company. All memoranda, notes, lists, records, engineering
drawings, technical specifications and related documents and other documents or papers (and all
copies thereof) relating to the Company, including such items stored in computer memories,
microfiche or by any other means, made or compiled by or on behalf of the Executive after the date
hereof, or made available to the Executive after the date hereof relating to the Company, its
affiliates or any entity which may hereafter become an affiliate thereof, shall be the property of
the Company, and shall be delivered to the Company promptly upon the termination of the Executive’s
employment with the Company or at any other time upon request; provided, however, that the
Executive’s address books, diaries, chronological correspondence files and rolodex files shall be
deemed to be property of the Executive.
3.1.4 Original Material. The Executive agrees that any inventions, discoveries,
improvements, ideas, concepts or original works of authorship relating directly to the Company
Business, including without limitation information of a technical or business nature such as ideas,
discoveries, designs, inventions, improvements, trade secrets, know-how, manufacturing processes,
product formulae, design specifications, writings and other works of authorship, computer programs,
financial figures, marketing plans, customer lists and data, business plans or methods and the
like, which relate in any manner to the actual or anticipated business or the actual or anticipated
areas of research and development of the Company and its divisions, subsidiaries, affiliates, or
related entities, whether or not protectable by patent or copyright, that have been originated,
developed or reduced to practice by the Executive alone or jointly with others during the
Executive’s employment with the Company shall be the property of and belong exclusively to the
Company. The Executive shall promptly and fully disclose to the Company the origination or
development by the Executive of any such material and shall provide the Company with any
information that it may reasonably request about such material. Either during or subsequent to the
Executive’s employment, upon the request and at the expense of the Company or its nominee, and for
no remuneration in addition to that due the Executive pursuant to his employment by the Company,
but at no expense to him, the Executive agrees to execute, acknowledge, and deliver to the Company
or its attorneys any and all instruments which, in the
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judgment of the Company or its attorneys, may be necessary or desirable to secure or maintain
for the benefit of the Company adequate patent, copyright, and other property rights in the United
States and foreign countries with respect to any such inventions, improvements, ideas, concepts, or
original works of authorship embraced within this Agreement.
3.1.5 Employees of the Company and its Affiliates. The Executive agrees to refrain
during the Restricted Period from inducing or attempting to influence any employee of the Company,
its divisions, subsidiaries and/or affiliated entities to terminate his employment.
3.1.6 Customers. The Executive also agrees to refrain during the Restricted Period
from diverting, taking, soliciting and/or accepting on his own behalf or on the behalf of another
person, firm, or company, the business of any past or present customer of the Company, its
divisions, subsidiaries and/or other affiliated entities, or any identified prospective or
potential customer of the Company, its divisions, subsidiaries and/or affiliated entities, whose
identity became known to the Executive through his employment by the Company.
3.2 Rights and Remedies Upon Breach. If the Executive breaches, any of the provisions
contained in Section 3.1 of this Agreement (the “Restrictive Covenants”), the Company shall have
the following rights and remedies, each of which rights and remedies shall be independent of the
others and severally enforceable, and each of which is in addition to, and not in lieu of, any
other rights and remedies available to the Company under law or in equity:
3.2.1 Specific Performance. The right and remedy to have the Restrictive Covenants
specifically enforced by any court of competent jurisdiction, it being agreed that any breach of
the Restrictive Covenants would cause irreparable injury to the Company and that money damages
would not provide an adequate remedy to the Company.
3.2.2 Accounting. The right and remedy to require the Executive to account for and
pay over to the Company all compensation, profits, monies, accruals, increments or other benefits
derived or received by the Executive as the result of any action constituting a breach of the
Restrictive Covenants.
3.3 Severability of Covenants. The Executive acknowledges and agrees that the
Restrictive Covenants are reasonable and valid in duration and geographical scope and in all other
respects. If any court determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not thereby be affected
and shall be given full effect without regard to the invalid portions.
3.4 Court Review. If any court determines that any of the Restrictive Covenants, or
any part thereof, is unenforceable because of the duration or geographical scope of, or scope of
activities restrained by, such provision, such court shall have the power to reduce the duration or
scope of such provision, as the case may be, and, in its reduced form, such provision shall then be
enforceable.
3.5 Enforceability in Jurisdictions. The Company and the Executive intend to and
hereby confer jurisdiction to enforce the Restrictive Covenants upon the courts of any jurisdiction
within the geographical scope of such Restrictive Covenants. If the courts of any
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one or more of such jurisdictions hold the Restrictive Covenants unenforceable by reason of
the breadth of such scope or otherwise, it is the intention of the Company that such determination
not bar or in any way affect the right of the Company to the relief provided above in the courts of
any other jurisdiction within the geographical scope of such Restrictive Covenants, as to breaches
of such Restrictive Covenants in such other respective jurisdictions, such Restrictive Covenants as
they relate to each jurisdiction being, for this purpose, severable into diverse and independent
covenants.
4. Termination.
4.1 Termination Upon Death. If the Executive dies during the Term, this Agreement
shall terminate; provided, however, that in any such event, the Company shall pay to the
Executive’s estate (i) any portion of the Annual Salary and any Incentive Bonus that shall have
been earned by the Executive prior to the termination but not yet paid; (ii) any Benefits that have
vested in the Executive at the time of such termination as a result of his participation in any of
the Company’s benefit plans; and (iii) any expenses with respect to which the Executive is entitled
to reimbursement pursuant to this Agreement. In addition, the Executive’s right to
indemnification, payment or reimbursement pursuant to Section 6 of this Agreement shall not be
affected by such termination and shall continue in full force and effect, both with respect to
proceedings that are threatened, pending or completed at the date of such termination and with
respect to proceedings that are threatened, pending or completed after that date.
4.2 Termination With Cause. The Company has the right, at any time during the Term,
subject to all of the provisions hereof, exercisable by serving notice, effective on or after the
date of service of such notice as specified therein, to terminate the Executive’s employment under
this Agreement and discharge the Executive with Cause. If such right is exercised, the Company’s
obligation to the Executive shall be limited solely to the payment of unpaid Annual Salary accrued,
together with earned but unpaid Incentive Bonus, if any, and Benefits vested up to the effective
date specified in the Company’s notice of termination. As used in this Agreement, the term “Cause”
shall mean and include (i) chronic alcoholism or controlled substance abuse as determined by a
doctor mutually acceptable to the Company and the Executive; (ii) an act of proven fraud or
dishonesty on the part of the Executive with respect to the Company or its subsidiaries; (iii)
knowing and material failure by the Executive to comply with material applicable laws and
regulations relating to the business of the Company or its subsidiaries; (iv) the Executive’s
material and continuing failure to perform (as opposed to unsatisfactory performance) his duties
hereunder or a material breach by the Executive of this Agreement except, in each case, where such
failure or breach is caused by the illness or other similar incapacity or disability of the
Executive; or (v) conviction of a crime involving moral turpitude or a felony. Prior to the
effectiveness of termination for Cause under subclause (i), (ii), (iii) or (iv) above, the
Executive shall be given thirty (30) days prior notice from the Board specifically identifying the
reasons which are alleged to constitute Cause for any termination hereunder and an opportunity to
be heard by the Board in the event the Executive disputes such allegations.
4.3 Termination Without Cause. The Company has the right, at any time during the
Term, subject to all of the provisions hereof, exercisable by serving notice, effective on or after
the date of service of such notice as specified therein, to terminate the Executive’s
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employment under this Agreement and discharge the Executive without Cause. If the Executive
is terminated during the Term without Cause (including any termination which is deemed to be a
constructive termination without Cause under Section 4.6 hereof), the Company’s obligation to the
Executive shall be limited solely to the following:
4.3.1 Severance Payments. The Company shall pay the Executive, in lump sum within
thirty (30) days after the date of termination:
(i) the amounts otherwise payable to Executive upon his death under Section 4.1 hereof;
and
(ii) an amount equal to: 1) in the event such termination occurs within one (1) year
after a Change of Control, an amount equal to three (3) times (3x) the sum of: (a) the
Annual Salary of Executive in effect on the date of termination (or, if the Company has
reduced the Executive’s Annual Salary in breach of this Agreement, the Executive’s Annual
Salary immediately before such reduction) plus (b) a bonus equal to fifty percent (50%) of
such Annual Salary; or 2) in the event such termination occurs at any time other than within
one (1) year after a Change of Control, an amount equal to the sum of: (a) the Annual Salary
of the Executive in effect on the date of termination (or, if the Company has reduced the
Executive’s Annual Salary in breach of this Agreement, the Executive’s Annual Salary
immediately before such reduction) plus (b) a bonus equal to fifty percent (50%) of such
Annual Salary.
4.3.2 Extension of Medical Benefits. The Executive shall be entitled to an extension
of medical benefits as provided in clauses (i) or (ii) below, as applicable:
(i) if the Executive has attained age 55 and has completed at least five years of
continuous service with the Company at the date of his termination, the Company will provide
the Executive and, if the Executive is married, the Executive’s spouse and minor dependents
with medical and dental coverage at a level that in all respects is not less than the
medical and dental coverage available to the Executive under the Company’s group health plan
as of the Effective Date for the period commencing on the date such coverage otherwise would
cease due to his termination and ending on the earlier of (a) the Executive’s attainment of
age 65 or (b) the date the Executive first becomes covered after the date of his termination
under another group health plan; provided, however that the Executive is not obligated to
seek employment following his termination or to enroll for coverage under any other group
health plan; or
(ii) if the Executive has not attained age 55, but has completed at least five years of
continuous service with the Company at the date of his termination, the Company will provide
the Executive and, if the Executive is married, the Executive’s spouse and minor dependents
with medical and dental coverage at a level that in all respects is not less than the
medical and dental coverage available to the Executive under the Company’s group health plan
as of the Effective Date, for the period commencing on the date such coverage otherwise
would cease due to his termination and ending on the earlier of (a) three years following
the date of the Executive’s termination or (b) the date the Executive first becomes covered
after the date of his termination under another group
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health plan; provided, however that the Executive is not obligated to seek employment
following his termination or to enroll for coverage under any other group health plan.
The medical and dental benefits provided to the Executive and, if applicable, to the Executive’s
spouse and minor dependents pursuant to this Section 4.3.2 shall be provided by the Company in a
manner such that the Executive will not be taxable on any reimbursements to or on behalf of the
Executive and, if applicable, to or on behalf of the Executive’s spouse. In addition, such medical
and dental benefits shall be provided at no cost to the Executive; provided, however, that if the
Company reasonably determines, based on the advice of its legal counsel, that the Executive must be
taxed on the Company’s actual cost of providing such medical and dental coverage to the Executive
(the “Coverage Cost”) to avoid the Executive being taxed on the reimbursements relating to such
coverage, the Company and the Executive agree that the Company will deliver timely to the Executive
appropriate tax information returns to cause the Executive to include the Coverage Cost in the
Executive’s income.
4.4 Termination by the Executive. Any termination of this Agreement by the Executive
during the Term, except such termination as is deemed to be a constructive termination without
Cause by the Company under Section 4.6 of this Agreement, shall be deemed to be a breach of the
terms of this Agreement for the purposes of Section 3.1.1 hereof and shall entitle the Company to
discontinue payment of all Annual Salary, Incentive Bonus and Benefits not earned and payable prior
to the date of such termination.
4.5 Termination upon Disability. If during the Term the Executive becomes physically
or mentally disabled, whether totally or partially, as evidenced by the written statement of a
competent physician licensed to practice medicine in the United States who is mutually acceptable
to the Company and the Executive or his closest relative if he is not then able to make such a
choice, so that the Executive is unable substantially to perform his services hereunder for (i) a
period of four consecutive months, or (ii) for shorter periods aggregating six months during any
twelve (12) month period, the Company may at any time after the last day of the four consecutive
months of disability or the day on which the shorter periods of disability equal an aggregate of
six months, by written notice to the Executive, terminate the Executive’s employment hereunder and
discontinue payments of the Annual Salary, Incentive Bonus and Benefits accruing from and after the
date of such termination. The Executive shall be entitled to the full compensation payable to him
hereunder for periods of disability shorter than the periods specified in clauses (i) and (ii) of
the previous sentence. In addition, the Executive’s right to indemnification, payment or
reimbursement pursuant to Section 6 of this Agreement shall not be affected by such termination and
shall continue in full force and effect, both with respect to proceedings that are threatened,
pending or completed at the date of such termination and with respect to proceedings that are
threatened, pending or completed after that date.
4.6 Constructive Termination Without Cause. Notwithstanding any other provision of
this Agreement, the Executive’s employment under this Agreement may be terminated during the Term
by the Executive, which shall be deemed to be constructive termination by the Company without
Cause, if one of the following events shall occur without the consent of the Executive: (i) a
failure to elect or reelect or to appoint or reappoint the Executive to the office of Executive
Vice President and Chief Operating Officer of the Company or other material change by the Company
of the Executive’s functions, duties or responsibilities
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which change would reduce the ranking or level, dignity, responsibility, importance or scope
of the Executive’s position with the Company from the position and attributes thereof described in
Section 1 above; (ii) the assignment or reassignment by the Company of the Executive to a location
not within fifty (50) miles of the Company’s current location; (iii) the liquidation, dissolution,
consolidation or merger of the Company, or transfer of all or substantially all of its assets,
other than a transaction in which a successor corporation with a net worth substantially the same
as or greater than that of the Company assumes this Agreement and all obligations and undertakings
of the Company hereunder; (iv) a reduction in the Executive’s Annual Salary; (v) a Change of
Control as hereinafter defined; (vi) the failure of the Company to continue to provide the
Executive with office space, related facilities and secretarial assistance that are commensurate
with the Executive’s responsibilities to and position with the Company; (vii) the notification by
the Company of the Company’s intention not to observe or perform one or more of the obligations of
the Company under this Agreement; (viii) the failure by the Company to indemnify, pay or reimburse
the Executive at the time and under the circumstances required by Section 6 of this Agreement; (ix)
the occurrence of any other material breach of this Agreement by the Company or any of its
subsidiaries; or (x) the delivery of notice by the Company in accordance with Section 1.1 hereof
that it desires to terminate this Agreement. Any such termination shall be made by written notice
to the Company specifying the event relied upon for such termination and given within sixty (60)
days after such event. Any constructive termination shall be effective sixty (60) days after the
date the Company has been given such written notice setting forth the grounds for such termination
with specificity; provided, however, that the Executive shall not be entitled to terminate this
Agreement in respect of any of the grounds set forth above if within sixty (60) days after such
notice the action constituting such ground for termination has been cured and is no longer
continuing. A constructive termination by the Company without Cause shall terminate the
Restrictive Period hereunder.
4.7 Change of Control. For the purposes hereof, a “Change of Control of the Company”
shall be deemed to have occurred if (i) any “Person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the “Act”)) is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Act, directly or indirectly, of securities of the
Company representing thirty-five percent (35%) or more of the combined voting power of the
Company’s then outstanding securities; (ii) there occurs a proxy contest or a consent solicitation,
or the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other
reorganization, as a consequence of which members of the Board in office immediately prior to such
transaction or event constitute less than a majority of the Board thereafter; or (iii) during any
period of two consecutive years, other than as a result of an event described in clause (ii) of
this Section 4.7, individuals who at the beginning of such period constituted the Board (including
for this purpose any new director whose election or nomination for election by the Company’s
stockholders was approved by a vote of at least a majority of the directors then still in office
who were directors at the beginning of such period) cease for any reason to constitute at least a
majority of the Board.
4.8 Effect of Section 409A of the Code on Timing of Separation-related Payments.
Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on
the date Executive’s employment with the Company terminates or at such other time that the Company
determines to be relevant, the Executive is a “specified employee” (as such term is defined under
Section 409A of the Internal Revenue Code of 1986, as amended
11
(the “Code”)) of the Company and (ii) that any payments to be provided to the Executive
pursuant to this Agreement are or may become subject to the additional tax under Section
409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code
(“Section 409A Taxes”) if provided at a time otherwise required under this Agreement, then such
payment shall be delayed until a date that is six (6) months after the date of Executive’s
“separation from service” (as such term is defined in Section 409A of the Code) with the Company,
or such shorter period that, as determined by the Company, is sufficient to avoid the imposition of
Section 409A Taxes.
5. Insurance. The Company may, from time to time, apply for and take out, in its own
name and at its own expense, naming itself or one or more of its affiliates as the designated
beneficiary (which it may change from time to time), policies for life, health, accident,
disability or other insurance upon the Executive in any amount or amounts that it may deem
necessary or appropriate to protect its interest. The Executive agrees to aid the Company in
procuring such insurance by submitting to medical examinations and by completing, executing and
delivering such applications and other instruments in writing as may reasonably be required by an
insurance company or companies to which any application or applications for insurance may be made
by or for the Company.
6. Indemnification.
6.1 Claims. The Company shall, to the maximum extent not prohibited by law, indemnify
the Executive if he is made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or investigative,
including an action by or in the right of the Company to procure a judgment in its favor
(collectively, a “Proceeding”), by reason of the fact that the Executive is or was a director or
officer of the Company, or is or was serving in any capacity at the request of the Company for any
other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise,
against judgments, fines, penalties, excise taxes, amounts paid in settlement and costs, charges
and expenses (including attorneys’ fees and disbursements) paid or incurred in connection with any
such Proceeding.
6.2 Expenses. The Company shall, from time to time, reimburse or advance to the
Executive the funds necessary for payment of expenses, including attorneys’ fees and disbursements,
incurred in connection with any Proceeding in advance of the final disposition of such Proceeding;
provided, however, that, if required by the Texas Business Corporation Act, such expenses incurred
by or on behalf of the Executive may be paid in advance of the final disposition of a Proceeding
only upon receipt by the Company of an undertaking, by or on behalf of the Executive, to repay any
such amount so advanced if it shall ultimately be determined by final judicial decision from which
there is no further right of appeal that the Executive is not entitled to be indemnified for such
expenses.
6.3 Non-Exclusivity. The right to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 6 shall not be deemed exclusive of any
other rights which the Executive may now or hereafter have under any law, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
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6.4 Continuation of Rights. The right to indemnification and reimbursement or
advancement of expenses provided by, or granted pursuant to, this Section 6 shall continue as to
the Executive after he has ceased to be a director, officer or employee of the Company and shall
inure to the benefit of the heirs, executors and administrators of the Executive’s estate.
6.5 D&O Insurance. The Company shall purchase and maintain director and officer
liability insurance on such terms and providing such coverage as the Board determines is
appropriate, and the Executive shall be covered by such insurance on the same basis as the other
directors and executive officers of the Company.
6.6 Enforcement. The right to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Section 6 shall be enforceable by the Executive
in any court of competent jurisdiction. The burden of proving that such indemnification or
reimbursement or advancement of expenses is not appropriate shall be on the Company. Neither the
failure of the Company (including its board of directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such action that such
indemnification or reimbursement or advancement of expenses is proper in the circumstances nor an
actual determination by the Company (including its board of directors, independent legal counsel,
or its stockholders) that the Executive is not entitled to such indemnification or reimbursement or
advancement of expenses shall constitute a defense to the action or create a presumption that the
Executive is not so entitled. The Executive shall also be indemnified for any expenses incurred in
connection with successfully establishing his right to such indemnification or reimbursement or
advancement of expenses, in whole or in part, in any such proceeding.
6.7 Other Services. If the Executive serves (i) another corporation of which a
majority of the shares entitled to vote in the election of its directors is held by the Company, or
(ii) any employee benefit plan of the Company or any corporation referred to in clause (i), in any
capacity, then he shall be deemed to be doing so at the request of the Company.
6.8 Applicable Law. The right to indemnification or reimbursement or advancement of
expenses shall be interpreted on the basis of the applicable law in effect at the time of the
occurrence of the event or events giving rise to the applicable Proceeding.
7. Other Provisions.
7.1 Section 409A Compliance. It is the intention of the Company and the Executive
that this Agreement not result in the imposition of Section 409A taxes on the Executive. The
Company and the Executive acknowledge that final Treasury Regulations were issued recently under
Section 409A of the Code requiring arrangements that are considered as providing for deferral of
compensation to be included in a written document containing terms consistent with Section 409A of
the Code on or before December 31, 2007 in order to avoid Section 409A Taxes. The Company and
Executive agree to work together in good faith in an effort to comply with Section 409A of the Code
including, if necessary, amending this Agreement, provided that the Company shall not be required
to assume any increased economic burden.
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7.2 Certain Definitions. As used in this Agreement, the following terms have the
following meanings unless the context otherwise requires:
(i) “affiliate” with respect to the Company means any other person controlled by or
under common control with the Company but shall not include any stockholder or director of
the Company, as such.
(ii) “person” means any individual, corporation, partnership, firm, limited liability
company, association, joint-stock company, trust, unincorporated organization, governmental
or regulatory body or other entity.
(iii) “subsidiary” means any corporation 50% or more of the voting securities of which
are owned directly or indirectly by the Company.
7.3 Notices. Any notice or other communication required or permitted hereunder shall
be in writing and shall be delivered personally, telegraphed, telexed, sent by facsimile
transmission or sent by certified, registered or express mail, postage prepaid. Any such notice
shall be deemed given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, on the date of actual receipt thereof, as follows:
| (i) | if to the Company, to: | |||
| Grey Wolf, Inc. | ||||
| 00000 Xxxxxxxx Xxxxxx, Xxxxx 000 | ||||
| Xxxxxxx, Xxxxx 00000 | ||||
| (ii) | if to the Executive, to: | |||
| Xxxxx X. Xxxxxxx | ||||
| c/o Grey Wolf, Inc. | ||||
| 00000 Xxxxxxxx Xxxxxx, Xxxxx 000 | ||||
| Xxxxxxx, Xxxxx 00000 |
Any party may change its address for notice hereunder by notice to the other party hereto.
7.4 Entire Agreement. This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes all prior agreements, written or
oral, with respect thereto.
7.5 Waivers and Amendments. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms and conditions hereof may be waived, only by a written
instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No
delay on the part of any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof nor shall any waiver on the part of any party of any such right, power or
privilege hereunder, nor any single or partial exercise of any right, power or privilege hereunder,
preclude any other or further exercise thereof or the exercise of any other right, power or
privilege hereunder.
14
7.6 Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas (without giving effect to the choice of law provisions thereof)
where the employment of the Executive shall be deemed, in part, to be performed and enforcement of
this Agreement or any action taken or held with respect to this Agreement shall be taken in the
courts of appropriate jurisdiction in Houston, Texas.
7.7 Assignment. This Agreement, and any rights and obligations hereunder, may not be
assigned by the Executive and may be assigned by the Company (subject to Section 4.6 (iii) hereof)
only to a successor by merger or purchasers of substantially all of the assets of the Company.
7.8 Counterparts. This Agreement may be executed in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all of which together shall
constitute one and the same instrument.
7.9 Headings. The headings in this Agreement are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
7.10 No Presumption Against Interest. This Agreement has been negotiated, drafted,
edited and reviewed by the respective parties, and therefore, no provision arising directly or
indirectly herefrom shall be construed against any party as being drafted by said party.
7.11 Validity Contest. The Company shall promptly pay any and all legal fees and
expenses incurred by the Executive from time to time as a direct result of the Company’s contesting
the due execution, authorization, validity or enforceability of this Agreement. Executive shall
have no obligation to mitigate damages suffered as a result of termination of his employment with
the Company. The provisions of this Section 7.10 shall survive termination of this Agreement.
7.12 Dispute Resolution. If any dispute arises out of or relates to this Agreement,
or the breach thereof, the Executive and the Company agree to promptly negotiate in good faith to
resolve such dispute. If the dispute cannot be settled by the parties through negotiation, the
Executive and the Company agree to try in good faith to settle the dispute by mediation under the
Commercial Mediation Rules of the American Arbitration Association before resorting to arbitration,
litigation or any other dispute resolution procedure. If the parties are unable to settle the
dispute by mediation as provided in the preceding sentence, any claim, controversy or dispute
arising out of or relating to this Agreement, or the breach thereof, shall be settled by binding
arbitration before a panel of three arbitrators in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. The arbitration shall be conducted in Houston, Xxxxxx
County, Texas, or such other location to which the parties mutually agree. The decision of the
arbitrator(s) shall be final and binding and judgment upon the award rendered may be entered in any
court having jurisdiction thereof. Notwithstanding the foregoing provisions of this Section 7.12,
the Company may exercise its rights as provided in Section 3 at any time and without regard to the
foregoing provisions of this Section 7.12.
15
7.13 Binding Agreement. This Agreement shall inure to the benefit of and be binding
upon the Company and its respective successors and assigns and the Executive and his legal
representatives.
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above
written.
| EXECUTIVE |
||||
| /s/ Xxxxx X. Xxxxxxx | ||||
| Xxxxx X. Xxxxxxx | ||||
| COMPANY GREY WOLF, INC. |
||||
| By: | /s/ Xxxxxx X. Xxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxx | |||
| Title: | Chairman, President and CEO | |||
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