TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (the "Agreement") is entered into
as of the 4th day of February, 2004 between Transocean Holdings Inc., a Delaware
corporation ("Transocean Holdings"), and TODCO, a Delaware corporation
("TODCO").
WHEREAS, Transocean Inc., a Cayman Islands company ("Transocean"),
Transocean Holdings and TODCO currently contemplate that TODCO will make an
initial public offering ("IPO") of shares of TODCO Class A Common Stock held by
Transocean and Transocean Holdings;
WHEREAS, TODCO, as a wholly-owned Subsidiary, has previously received
certain administrative and support services from Transocean Holdings and its
Affiliates; and
WHEREAS, in order to effect an orderly transition by TODCO to a
separate, stand-alone entity following the IPO, TODCO desires Transocean
Holdings and its Affiliates to provide the services described herein.
NOW, THEREFORE, in consideration of the premises and the agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties, intending
to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. The following terms shall have the
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meaning ascribed thereto for purposes of this Agreement, including all exhibits
hereto:
(a) "Annual Compensation" shall mean, with respect to an
individual employee of a party for purposes of determining the employee's
hourly billing rate hereunder, such employee's annual base salary as
adjusted from time to time during the pertinent billing period plus the
employee's annual bonus accrual during such pertinent billing period.
All other capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Master Separation Agreement ("Separation
Agreement") entered into as of the date hereof among Transocean Holdings, TODCO
and Transocean.
ARTICLE II
SERVICES
SECTION 2.1 Services. Subject to the terms and conditions of this
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Agreement, Transocean Holdings, acting through its and/or its Affiliates'
respective employees, agents, contractors or independent third parties, agrees
to provide or cause to be provided to TODCO and its Subsidiaries the services
set forth in Exhibits I-V hereto (including any additional services provided
pursuant to Section 2.3, all of such services collectively referred to herein as
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the "Services). At all times during the performance of the Services, all Persons
performing such Services (including agents, temporary employees, independent
third parties and consultants) shall be construed as being independent from the
TODCO Group and such Persons shall not be considered or deemed to be an employee
of any member of the TODCO Group nor entitled to any employee benefits of TODCO
as a result of this Agreement. TODCO acknowledges and agrees that, except as may
be expressly set forth herein as a Service (including an additional Service to
be provided pursuant to Section 2.3 below) or otherwise expressly set forth in
the Separation Agreement or an Ancillary Agreement, no member of the Transocean
Group shall be obligated to provide, or cause to be provided, any service or
goods to any member of the TODCO Group.
SECTION 2.2 Service Coordinators. Each party will nominate a
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representative to act as the primary contact with respect to the provision of
the Services as contemplated by this Agreement (the "Service Coordinators"). The
initial Service Coordinators shall be Xxxxxx Xxxxxxx for Transocean Holdings and
Xxxxx X'Xxxxx for TODCO. Unless Transocean Holdings and TODCO otherwise agree,
Transocean Holdings and TODCO agree that all notices and communications relating
to this Agreement other than those day to day communications and xxxxxxxx
relating to the actual provision of the Services shall be directed to the
Service Coordinators in accordance with Section 11.2 hereof.
SECTION 2.3 Additional Services. From the date hereof until 12
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months following the IPO Closing Date (the "Extension Period") but in any event
subject to any limitations set forth in the Exhibits hereto, TODCO may request
additional Services from Transocean Holdings by providing written notice. Upon
the mutual written agreement as to the nature, cost, duration and scope of such
additional Services, Transocean Holdings and TODCO shall supplement in writing
the Exhibits hereto to include such additional Services. These additional
Services shall not extend past the end of the Extension Period.
SECTION 2.4 Third Party Services. Transocean Holdings shall have
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the right to hire third party subcontractors to provide all or part of any
Service hereunder; provided, that, in the event such subcontracting is
inconsistent with past practices and the practice applied by Transocean
generally from time to time within its own organization, Transocean Holdings
shall obtain the prior written consent of TODCO, which consent shall not be
unreasonably withheld.
SECTION 2.5 Standard of Performance; Limitation of Liability. The
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Services to be provided hereunder shall be performed with the same general
degree of care as when performed within the Transocean organization. In the
event Transocean Holdings or its Affiliates fail to provide, or cause to be
provided, the Services in accordance herewith, the sole and exclusive remedy of
TODCO shall be to, at TODCO's sole discretion, either (i) have the Service
reperformed, or (ii) not pay for such Service, or if payment has already been
made, receive a refund of the payment made for such defective service; provided
that in the event Transocean Holdings defaults in the manner described in
Section 7.1(ii), TODCO shall have the further rights set forth in Section 7.1.
EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 2.5, NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND, IMPLIED OR EXPRESSED, ARE MADE BY TRANSOCEAN HOLDINGS OR
ITS AFFILIATES WITH RESPECT TO THE SERVICES UNDER THIS AGREEMENT AND ALL SUCH
REPRESENTATIONS OR WARRANTIES ARE HEREBY WAIVED AND DISCLAIMED.
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TODCO HEREBY EXPRESSLY WAIVES ANY RIGHT TODCO MAY OTHERWISE HAVE FOR ANY LOSSES,
TO ENFORCE SPECIFIC PERFORMANCE OR TO PURSUE ANY OTHER REMEDY AVAILABLE IN
CONTRACT, AT LAW OR IN EQUITY IN THE EVENT OF ANY NON-PERFORMANCE, INADEQUATE
PERFORMANCE, FAULTY PERFORMANCE OR OTHER FAILURE OR BREACH BY TRANSOCEAN
HOLDINGS OR ITS AFFILIATES UNDER OR RELATING TO THIS AGREEMENT, NOTWITHSTANDING
THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OR GROSS
NEGLIGENCE OF TRANSOCEAN HOLDINGS OR ITS AFFILIATES OR ANY OTHER PERSON INVOLVED
IN THE PROVISION OF SERVICES AND WHETHER DAMAGES ARE ASSERTED IN CONTRACT OR
TORT, UNDER FEDERAL, STATE OR NON U.S. LAWS OR OTHER STATUTE OR OTHERWISE.
SECTION 2.6 Conflict with Laws. Notwithstanding any other
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provision hereof, Transocean Holdings shall not be required to provide a Service
to the extent the provision thereof would violate or contravene an applicable
Law. To the extent that the provision of any such Service would violate an
applicable Law, the parties agree to work together in good faith to provide such
Service in a manner which would not violate any Law.
ARTICLE III
SERVICE CHARGES
SECTION 3.1 Compensation. Each Service will be provided at the
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price indicated in the corresponding Exhibit hereto.
ARTICLE IV
PAYMENT
SECTION 4.1 Payment. Charges for Services shall be invoiced
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monthly by Transocean Holdings or, at the option of Transocean Holdings, the
Transocean Holdings Affiliate providing the Service. TODCO shall make the
corresponding payment no later than 30 calendar days after receipt of the
invoice. Each invoice shall be directed to the TODCO Service Coordinator or such
other person designated in writing from time to time by such Coordinator. The
invoice shall set forth in reasonable detail for the period covered by such
invoice: (i) the Services rendered, (ii) the basis for the calculation of the
costs as set forth in Section 3.1 if applicable, and (iii) such additional
information as TODCO may reasonably request at least 30 days in advance of the
xxxxxxxx for a particular Service. In the event there is any dispute with
respect to an invoice, TODCO shall make the payment for all non-disputed
portions in accordance herewith.
ARTICLE V
TERM
SECTION 5.1 Term. The term of this Agreement shall commence upon
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the IPO Closing Date and shall continue in force until the termination of all
Services in accordance with the duration of such Services set forth in the
Exhibits hereto or as otherwise set forth herein.
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ARTICLE VI
DISCONTINUATION OF SERVICES
SECTION 6.1 Discontinuation of Services. Except for those Services
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for which a minimum duration has been set in the Exhibits hereto, either party
may, with the other party's prior written consent (which consent shall not be
unreasonably withheld), elect to discontinue any individual Service from time to
time.
ARTICLE VII
DEFAULT
SECTION 7.1 Termination for Default. In the event (i) of a failure
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of TODCO to pay for Services in accordance with the terms of this Agreement, or
(ii) of a failure of Transocean Holdings to perform, or cause to be performed,
the Services in accordance with the terms of this Agreement which failure
results or could reasonably result in a material adverse impact on the business,
operations or financial results of TODCO, then in either case the non-defaulting
party shall have the right, at its sole discretion, to terminate this Agreement
if the defaulting party has (A) failed to cure the default within 30 days of
receipt of the written notice of default or, (B) if such default is not
reasonably susceptible to cure within a 30 day period, taken action within 30
days of receipt of the written notice of default reasonably designed to cure
such default as soon as is reasonably practicable. TODCO's right to terminate
this Agreement set forth in (ii) above and the rights set forth in Section 2.5
shall constitute TODCO's sole and exclusive rights and remedies for a breach by
Transocean Holdings hereunder (including without limitation any breach caused by
an Affiliate of Transocean Holdings or other third party providing a Service
hereunder).
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Personal Injury. EACH PARTY (AS AN INDEMNIFYING PARTY)
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SHALL ASSUME ALL LIABILITY FOR AND SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD THE
OTHER PARTY, ITS AFFILIATES AND THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS
AND AGENTS (ALL AS INDEMNIFIED PARTIES) FREE AND HARMLESS FROM AND AGAINST ALL
LOSSES IN CONNECTION HEREWITH IN RESPECT OF INJURY TO OR DEATH OR SICKNESS OF
ANY EMPLOYEE, AGENT OR REPRESENTATIVE OF THE INDEMNIFYING PARTY, ITS AFFILIATES
OR THEIR CONTRACTORS OR SUBCONTRACTORS OF ANY TIER, HOWSOEVER ARISING AND
WHETHER OR NOT CAUSED BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR
ACTIVE OR PASSIVE) OR GROSS NEGLIGENCE OF THE INDEMNIFIED PARTIES, EXCEPT TO THE
EXTENT SUCH LOSS IS CAUSED BY THE WILLFUL MISCONDUCT OF AN INDEMNIFIED PARTY.
SECTION 8.2 Property Damage. EACH PARTY (AS AN INDEMNIFYING PARTY)
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SHALL ASSUME ALL LIABILITY FOR AND SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD THE
OTHER PARTY, ITS AFFILIATES AND THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS
AND AGENTS (ALL AS INDEMNIFIED PARTIES) HARMLESS FROM AND AGAINST ALL LOSSES IN
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CONNECTION HEREWITH IN RESPECT OF LOSS OF OR DAMAGE TO PROPERTY OWNED BY SUCH
INDEMNIFYING PARTY, ITS AFFILIATES, THEIR CONTRACTORS OR SUBCONTRACTORS OF ANY
TIER OR THEIR RESPECTIVE EMPLOYEES, AGENT OR REPRESENTATIVE, HOWSOEVER ARISING
AND WHETHER OR NOT CAUSED BY THE NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT
OR ACTIVE OR PASSIVE) OR GROSS NEGLIGENCE OF THE INDEMNIFIED PARTIES, EXCEPT TO
THE EXTENT SUCH LOSS IS CAUSED BY THE WILLFUL MISCONDUCT OF AN INDEMNIFIED
PARTY.
SECTION 8.3 Services Received. TODCO hereby acknowledges and
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agrees that:
(a) the Services to be provided hereunder are subject to and
limited by the provisions of Section 2.5 - Standard of Performance;
Limitation of Liability, Section 7.1 - Termination for Default and the
other provisions hereof, including without limitation, the limitation of
remedies available to TODCO which restricts available remedies resulting
from a Service not provided in accordance with the terms hereof to either
non-payment or reperformance of such defective Service and, in certain
limited circumstances, the right to terminate this Agreement;
(b) the Services are being provided solely to facilitate the
transition of TODCO to a separate company as a result of the IPO, and
Transocean Holdings and its Affiliates do not provide any such Services to
non-Affiliates;
(c) it is not the intent of Transocean Holdings and its Affiliates
to render, nor of TODCO to receive from Transocean Holdings and its
Affiliates, professional advice or opinions, whether with regard to tax,
legal, treasury, finance, employment or other matters, or technical advice,
whether with regard to information technology or other matters; TODCO shall
not rely on any Service rendered by or on behalf of Transocean Holdings for
such professional advice or opinions or technical advice; and TODCO shall
seek all third party professional advice and opinions or technical advice
as it may desire or need, and in any event TODCO shall be responsible for
and assume all risks associated with the Services, except to the limited
extent set forth in Sections 2.5 and 7.1; and
(d) a material inducement to Transocean Holdings' agreement to
provide the Services is the limitation of liability set forth herein and
the release and indemnity provided by TODCO.
ACCORDINGLY, EXCEPT WITH REGARD TO THE LIMITED REMEDIES AND
INDEMNITIES EXPRESSLY SET FORTH HEREIN, TODCO SHALL ASSUME ALL LIABILITY FOR AND
SHALL FURTHER RELEASE, DEFEND, INDEMNIFY AND HOLD THE OTHER PARTY, ITS
AFFILIATES AND THEIR RESPECTIVE EMPLOYEES, OFFICERS, DIRECTORS AND AGENTS (ALL
AS INDEMNIFIED PARTIES) FREE AND HARMLESS FROM AND AGAINST ALL LOSSES RESULTING
FROM, ARISING UNDER OR RELATED TO THE SERVICES, HOWSOEVER ARISING AND WHETHER OR
NOT CAUSED BY THE NEGLIGENCE OR GROSS NEGLIGENCE OF TRANSOCEAN HOLDINGS, ITS
AFFILIATES OR ANY THIRD PARTY SERVICE PROVIDER.
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ARTICLE IX
CONFIDENTIALITY
SECTION 9.1 Confidentiality. TODCO and Transocean Holdings each
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acknowledge and agree that the terms of Section 7.13 - Confidentiality of the
Separation Agreement shall apply to information, documents, plans and other data
made available or disclosed by one party to the other in connection with this
Agreement.
ARTICLE X
FORCE MAJEURE
SECTION 10.1 Performance Excused. Continued performance of a
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Service may be suspended immediately to the extent caused by any event or
condition beyond the reasonable control of the party suspending such performance
including acts of God, fire, labor or trade disturbance, war, civil commotion,
compliance in good faith with any Law, unavailability of materials or other
event or condition whether similar or dissimilar to the foregoing (a "Force
Majeure Event").
SECTION 10.2 Notice. The party claiming suspension due to a Force
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Majeure Event will give prompt notice to the other of the occurrence of the
Force Majeure Event giving rise to the suspension and of its nature and
anticipated duration.
SECTION 10.3 Cooperation. The parties shall cooperate with each
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other to find alternative means and methods for the provision of the suspended
Service.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Construction Rules. The article and section headings
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contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. As used in this
Agreement, unless otherwise provided to the contrary, (i) all references to days
or months shall be deemed references to calendar days or months and (ii) any
reference to a "Section," "Article" or "Appendix" shall be deemed to refer to a
section or article of this Agreement or an appendix to this Agreement. The words
"hereof," "herein" and "hereunder" and words of similar import referring to this
Agreement refer to this Agreement as a whole and not to any particular provision
of this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation." Unless otherwise specifically provided for herein, the
term "or" shall not be deemed to be exclusive.
SECTION 11.2 Notices. All notices and other communications
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hereunder shall be in writing and shall be deemed given upon (i) a transmitter's
confirmation of a receipt of a facsimile transmission, (ii) confirmed delivery
of a standard overnight courier or when delivered by hand or (iii) the
expiration of five business days after the date mailed by certified or
registered mail (return receipt requested), postage prepaid, to the parties at
the following addresses (or at such other addresses for a party as shall be
specified by like notice):
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If to Transocean Holdings, to:
Transocean Holdings Inc.
Attention: Corporate Controller
0 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
If to TODCO, to:
TODCO
Attention: Chief Financial Officer
0000 Xxxx Xxx Xxxxxxx Xxxxxxx, Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
SECTION 11.3 Assignment, Binding Effect. Neither this Agreement
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nor any of the rights, benefits or obligations hereunder may be assigned or
delegated by TODCO or Transocean Holdings (whether by operation of law or
otherwise) without the prior written consent of the other party; provided
however that the foregoing shall in no way restrict the performance of a Service
by an Affiliate of Transocean Holdings or a third party as otherwise allowed
hereunder.
SECTION 11.4 No Third Party Beneficiaries. Nothing in this
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Agreement, express or implied, is intended to or shall confer upon any Person
(other than TODCO, Transocean Holdings and any Transocean Holdings Affiliate
providing Services hereunder or their respective successors or permitted
assigns) any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, and no Person (except as so
specified) shall be deemed a third-party beneficiary under or by reason of this
Agreement.
SECTION 11.5 Amendment. No amendments, additions to, alterations,
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modifications or waivers of all or any part of this Agreement shall be of any
effect, whether by course of dealing or otherwise, unless explicitly set forth
in writing and executed by both parties hereto. If the provisions of this
Agreement and the provisions of any purchase order or order acknowledgment
written in connection with this Agreement conflict, the provisions of this
Agreement shall prevail.
SECTION 11.6 Waiver. The waiver by any party hereto of a breach
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of any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach. The failure of any party to require performance of any
provision of this Agreement shall not affect any parties right to full
performance thereof at any time thereafter.
SECTION 11.7 Severability. If any provision of this Agreement or
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the application of any such provision to any Person or circumstance shall be
declared judicially to be invalid, unenforceable or void, such decision shall
not have the effect of invalidating or voiding the remainder of this Agreement,
it being the intent and agreement of TODCO and Transocean Holdings that this
Agreement shall be deemed amended by modifying such provision to the extent
necessary to render it valid, legal and enforceable while preserving its intent
or, if such
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modification is not possible, by substituting therefor another provision that is
legal and enforceable and that achieves the same objective.
SECTION 11.8 Counterparts. This Agreement may be executed in two
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or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one agreement binding on TODCO and Transocean
Holdings.
SECTION 11.9 Governing Law. This Agreement shall be governed by,
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and construed in accordance with, the laws of the State of Texas without giving
effect to the conflicts of law principles thereof.
SECTION 11.10 Arbitration. All disputes and controversies which
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may arise out of or in connection with this Agreement and are not resolved
through good faith negotiation shall be settled by binding arbitration. The
arbitration will take place in Houston, Texas and shall be conducted in
accordance with the procedures of the Center for Public Resources of New York
("CPR"). The dispute shall be decided by a single arbitrator selected by the
parties; provided the parties are able to agree as set forth herein. The
arbitration shall be initiated by providing written notice to the other party.
The party so initiating the proceedings shall provide the other party in writing
three (3) names of potential arbitrators within fifteen (15) days of giving
notice to initiate arbitration. The other party will thereafter have thirty (30)
days to either select one of the three individuals or reject all three (a
"Rejection"). Failure to timely respond shall be deemed a Rejection. Should the
parties be unable to agree on a single arbitrator, each shall choose a single
arbitrator within fifteen (15) days of the Rejection by providing written notice
to the other party, and the two (2) arbitrators shall mutually select the third.
The award of the arbitration shall be final and binding upon both parties and
may be enforced in any court of competent jurisdiction.
SECTION 11.11 Relationship of Parties. This Agreement does not
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create a fiduciary relationship, partnership, joint venture or relationship of
trust or agency between the parties.
SECTION 11.12 Further Assurances. From time to time, each party
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agrees to execute and deliver such additional documents, and will provide such
additional information and assistance as any party may reasonably require to
carry out the terms of this Agreement.
SECTION 11.13 Regulations. All employees of Transocean Holdings
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and its Affiliates shall, when on the property of TODCO, conform to the rules
and regulations of TODCO concerning safety, health and security which are made
known to such employees in advance in writing.
SECTION 11.14 Survival. The parties agree that Articles VIII and
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IX will survive the termination of this Agreement and that any such termination
shall not affect any obligation for the payment of Services rendered prior to
termination.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of this 4th day of February, 2004.
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TRANSOCEAN HOLDINGS INC.
By: /s/ Xxxx X. Xxxxx
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Name: Xxxx X. Xxxxx
Title: Vice President and Secretary
TODCO
By: /s/ T. Xxxxx X'Xxxxx
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Name: T. Xxxxx X'Xxxxx
Title: Senior Vice President and
Chief Financial Officer
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EXHIBIT I
TO TRANSITION SERVICES AGREEMENT BETWEEN TODCO AND TRANSOCEAN INC.
INFORMATION TECHNOLOGY AND INFRASTRUCTURE
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Transocean Holdings shall provide or cause to be provided to the TODCO Group the
information technology ("IT") Services described in this Exhibit I. As used in
this Exhibit, unless the context requires otherwise, "Transocean" shall mean the
Transocean Group, and "TODCO" shall mean the TODCO Group.
1.0 INFRASTRUCTURE SERVICES
Transocean will allow TODCO access to Transocean's Wide Area Network ("WAN") via
secure connections at its third party providers' Houston facility ("Houston
Core"), currently Omnes. TODCO is responsible for the telecommunication lines
between its Houston, Houma and other offices, on the one hand, and Transocean's
Houston Core, on the other.
TODCO will be responsible for supporting all hardware which is located outside
of Transocean's computer facility or Houston Core.
TODCO's access to Transocean's WAN through its full T-1 communication line will
be for the following purposes:
- remote access to systems which are shared with Transocean including
Peoplesoft Human Resources Management, Peoplesoft General Ledger,
Peoplesoft Asset Management and ForeSite;
- remote access to inactive systems such as Infinium Human Resources, Payroll
and General Ledger (including Essbase) to extract historical data;
- routing of e-mail in accordance with Transocean's policies and practices;
and
- secure access to the Internet for browsing and internet-based transactions.
Capacity provided for Internet access will be limited to one 512k byte
line.
TODCO will not be given access to Transocean's Intranet nor to the following
features unless an integral part of the above applications:
- Transocean's Corporate Directory ("LDAP") and Bulletin Boards;
- Transocean's electronic documents system ("e-Docs"); or
- remote dial-up to the WAN via TACACS access servers.
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1.1 COST OF WAN ACCESS SERVICES
Transocean will invoice TODCO a monthly fee of $4,000 for providing access to
its WAN to the extent defined in section 1.0. The monthly fee does not cover
any of the costs relating to TODCO's WAN which will be funded directly by TODCO.
The monthly access fee has been computed using the estimated cost to TODCO for
establishing similar services. No adjustment to the fee will be made for
reduced utilization by TODCO, such as the elimination of the VPN link with
Venezuela.
The monthly access fee will be reviewed and adjusted annually in the light of
changes in the estimated cost to TODCO of establishing similar services. The
Service Coordinators or their designated representative shall be responsible for
such adjustment. All fee adjustments will be effective January 1 of each year.
1.2 DURATION OF WAN ACCESS SERVICES
TODCO will be required to utilize the Transocean's WAN in the manner prescribed
by Transocean to obtain access to Transocean's systems so long as Transocean
retains a majority voting interest in TODCO and is required to consolidate
TODCO's financial results with those of Transocean.
Transocean will continue to provide TODCO with restricted access to the
Transocean WAN for up to one year after the date on which TODCO's financial
results are no longer required to be consolidated with those of Transocean to
the extent that access to Transocean's accounting systems will be extended as
described in Section 2 below. The extension will be provided at TODCO's written
request in accordance with, and subject to the same termination provision set
forth in, such Section 2.
2.0 ACCOUNTING SYSTEMS
2.1 ACCOUNTING SYSTEM SERVICES
TODCO will have access as approved by Transocean's management for an agreed
number of users to utilize Transocean's accounting systems, comprising
Peoplesoft General Ledger ("PSGL"), Peoplesoft Asset Management ("PSAM"),
International Financial Accounting System ("IFAS") and other supporting
Microsoft Access-based applications for aging accounts receivable, recording
cash transactions and billing inter-company transactions.
Transocean will provide TODCO with IT support for these accounting systems
including routine system maintenance and ad hoc problem solving, development and
installation of upgrades as deemed necessary by Transocean, data back-up and
storage for those systems maintained in Transocean's central data facility. The
Transocean IT department will not provide TODCO with TODCO-specific system
enhancements, unless separately agreed and documented.
These Services do not include supporting ForeSite, Transocean's budgeting and
forecasting software, to which TODCO's access is restricted under the terms
established in Exhibit II, Accounting.
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2.2 COST OF ACCOUNTING SYSTEMS SERVICES
Transocean will charge TODCO a fee of $10,000 per calendar month for access to
its accounting systems. The monthly fee has been calculated by reference to the
estimated cost to TODCO of installing and maintaining its own independent
accounting system. The monthly fee will be reviewed each calendar year in the
light of changes in cost to TODCO of installing its own accounting system. Any
adjustment to the monthly fee must be mutually agreed in writing by the Service
Coordinators and will be applicable from January 1 of each calendar year.
2.3 DURATION
TODCO will be required to utilize the Transocean accounting systems so long as
Transocean retains a majority voting interest in TODCO and is required to
consolidate TODCO's financial results.
Transocean will, upon TODCO's request, continue to provide TODCO with access to
Transocean's accounting systems for up to one year after the date on which
TODCO's financial results are no longer consolidated. The extension will be
provided at TODCO's written request and will be granted by Transocean to allow
TODCO the time necessary to install its own accounting systems and transfer its
historical data from Transocean's. TODCO may early terminate the extension at
any time by providing 90 days notice in writing.
3. PROCUREMENT SYSTEM
3.1 DESCRIPTION OF SERVICES
Transocean's IT department has designed and developed, in-house, a software
application for TODCO's use in its procurement process, the Transocean Inc.
Procurement System ("TIPS"). TODCO will have nonexclusive ownership rights to
TIPS, including the source code. Transocean will have a perpetual,
royalty-free, nonexclusive license for use of TIPS, including the source code.
TODCO will provide and maintain the hardware required to run TIPS and Transocean
will provide support for the installation and maintenance of the application
version put into production. Such support will include routine system
maintenance, system documentation, correction of program errors or "bugs" to the
extent Transocean deems (in its sole discretion) the correction feasible without
incurring additional costs, and general trouble-shooting. TODCO will be
responsible for safeguarding, maintaining back-ups, storing data, and the
production application programs.
3.2 COST OF SERVICES
Transocean will charge TODCO a fee of $5,000 per month to provide the support
Services defined in 3.1. The monthly fee is based on an estimate of what an
outside contractor would charge for similar services. The monthly fee will be
reviewed annually and adjusted on a mutually agreed basis in the light of quotes
provided by third parties for providing such a service.
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Transocean will provide the application's source code, free of charge, at the
time TODCO assumes responsibility for maintaining TIPS on an ongoing basis.
3.3 DURATION
It is agreed that TODCO will remove the use of the Transocean name and logo from
the TIPS application within (6) six months of the date on which Transocean loses
its majority voting interest in TODCO.
Transocean will automatically cease to provide the support Services described in
this Section 3 once Transocean no longer owns a majority voting interest in
TODCO. TODCO can also terminate such support Services upon 30 days prior
written notice.
4. LEGACY SYSTEMS
4.1 DESCRIPTION OF SERVICE
Transocean will provide TODCO access and routine IT support needed to enable
TODCO to have viewing and report-generating access to the prior years' records
of TODCO's business activities contained in inactive or "legacy" systems at the
same general level as Transocean's access and capabilities. The legacy systems
include the human resource, payroll and general ledger (including Showcase)
modules of Infinium as well as any previous records in electronic form covering
the activities of TODCO and its predecessor companies which are and remain in
Transocean's possession and to which Transocean retains access.
As defined in Section 7.3 of the Separation Agreement, Transocean will cooperate
with TODCO, to the extent feasible, in the separation and transfer of legacy
data between those relating to TODCO's past transactions and those relating to
Transocean.
Transocean shall not be required to take any action or incur any expense for or
on behalf of TODCO in regard to these legacy systems which Transocean does not
otherwise take or incur for or on behalf of Transocean.
4.2 COST OF SERVICE
Transocean will charge $500 per month for the legacy Services. To the extent
that Transocean's legacy Services beyond the access and routine support Services
described in Section 4.1 above are required to separate and transfer TODCO data
to TODCO, Transocean will provide such services at $125 per hour for Transocean
personnel plus actual costs incurred for third party resources and any
out-of-pocket expenditure.
4.3 DURATION
Transocean will provide the legacy Services during the twelve month period
following the IPO Closing Date; provided that in no event shall Transocean
provide such Services after the point at which it no longer provides to TODCO
the WAN access Services described in Section 1.0 of this Exhibit. TODCO will be
responsible for ensuring that all relevant legacy data has been extracted and
transferred to TODCO prior to the termination of the legacy Services.
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5.0 GENERAL
TODCO understands and agrees that Transocean cannot and does not in any way
guarantee or warrant that the access to the IT infrastructure, systems and
applications described in this Exhibit I will be continuous and uninterrupted.
Except as expressly set forth in Section 2.5 and Articles VII and VIII of this
Agreement, Transocean shall have no liability to TODCO with respect to any of
the IT Services described in this Exhibit I.
14
EXHIBIT II
TO TRANSITION SERVICES AGREEMENT BETWEEN TODCO AND TRANSOCEAN INC.
ACCOUNTING
----------
1.0 GENERAL
Transocean Holdings shall provide or cause to be provided to the TODCO Group the
accounting related Services described in this Exhibit II. As used in this
Exhibit, unless the context requires otherwise "Transocean" shall mean the
Transocean Group, and "TODCO" shall mean the TODCO Group.
For the sake of clarity, the parties acknowledge and agree that, as of the IPO
Closing Date, TODCO will have assumed or will assume direct responsibility for
the functions (including the recruitment of personnel and establishment of
appropriate internal control procedures normally associated with such functions)
set forth in this Section 1.0 below (the "Transferred Accounting Services").
Except as may be expressly agreed as additional Services under Section 2.3 of
this Agreement, Transocean shall have no obligation to provide any Transferred
Accounting Service; provided that nothing contained in this Exhibit II shall be
interpreted or deemed to obligate Transocean to provide any service which is not
otherwise expressly required hereunder. The Transferred Accounting Services
shall include:
(a) Accounting for all transactions involving the movement of cash;
(b) Administration of accounts payable, including but not limited to the
receipt, recording and payment of vendor invoices on a timely basis;
(c) Administration of employee garnishments, including but not limited to the
withholding of the appropriate amounts from employee compensation,
recording and payment to the correct beneficiary;
(d) Timely preparation and submission of all statistical reports routinely
requested by entities of government throughout the fiscal year;
(e) Calculation and recording of certain accruals or reserves for liabilities
incurred under medical and dental insurance programs, Protection and
Indemnity insurance programs, and retirement plans;
(f) Review and analysis of balance sheet accounts relating to TODCO payrolls;
(g) Accounting for all transactions involving Property, Plant and Equipment,
including but not limited to capital additions, disposals, transfers,
retirements and re-valuations;
(h) Preparation and filing of all documents required to be filed with the
Securities and Exchange Commission ("SEC") under the Securities Act of 1933
and the Securities Exchange Act of 1934, including but not limited to Forms
0-X, 00-X, 00-X, 00-X, 8-K,
15
X-0, X-0 and S-4, or other filings with other securities regulatory bodies
("Public Filings"); and
(i) Preparation of separate financial statements for any of TODCO's
subsidiaries.
2.0 BUDGETS AND FORECASTS
TODCO will develop and maintain its own budgeting and forecasting software.
In order to comply with Section 7.5 of the Separation Agreement and to allow
Transocean to prepare consolidated budgets and forecasts, TODCO will upload
summary budget and forecast data into ForeSite, Transocean's budgeting and
forecasting system in accordance with deadlines pre-established by Transocean.
Transocean at its sole discretion will define the nature and extent of the
budgeted and forecast data to be input into ForeSite and will use reasonable
efforts to limit the level of detail so long as it is provided with hard copies
and soft copies of TODCO's budgeting and forecasting worksheets in a timely
manner.
Transocean will grant three TODCO users access to ForeSite free of charge and
will invoice TODCO $500 (five hundred US dollars) per month for the provision of
user support.
TODCO will input budget and forecast data into ForeSite so long as Transocean
maintains a voting interest in TODCO that, under US GAAP, requires Transocean to
fully consolidate TODCO's financial results. Access to ForeSite by TODCO users
will terminate at the date when Transocean is no longer so required to
consolidate TODCO.
If TODCO requests access to ForeSite for four or more users, Transocean will
invoice $360 (three hundred and sixty US dollars) per month for each user
starting with the fourth.
3.0 ACCOUNTING SYSTEMS SUPPORT
So long as TODCO's financial results are fully consolidated with those of
Transocean, TODCO will utilize Transocean's accounting systems for its
accounting records and the preparation of its financial statements. These
accounting systems include PeopleSoft General Ledger ("PSGL"), PeopleSoft Asset
Management ("PSAM") and International Financial Accounting System ("IFAS"). The
cost to TODCO for such access is as set forth in Exhibit I.
Transocean will provide Transocean's own user support to TODCO for all routine
procedures associated with PSGL, PSAM and IFAS, including:
- Uploading and editing journal vouchers;
- Distributing the suite of standardized summary and transactional reports;
- Updating existing or providing new master-file information such as exchange
rates, cost centers, account codes and bookkeeping companies;
16
- Maintaining the standard chart of accounts files including the creation of
new accounts which are for TODCO's exclusive use;
- Preparing and distributing monthly the "back-load" files extracted from
PSGL and containing a complete set of accounting data relating to the
activities of TODCO;
- Trouble-shooting and responding to user queries;
- Installing new systems or upgrades to existing systems and training TODCO
users thereon; and
- Once TODCO's financial results no longer require consolidation with
Transocean's, assisting in the extraction and transfer of TODCO's
historical records to an alternative accounting system selected by TODCO.
Transocean will invoice $1,700 (one thousand seven hundred US dollars) per month
for providing the aforementioned user support.
The user support does not cover non-routine projects such as the development of
non-standard summary or transactional reports to meet TODCO's specific
requirements. All assistance provided on such projects will be invoiced at an
hourly rate calculated using the Annual Compensation of the assigned employee
multiplied by a factor of 1.27 and divided by 1,888.
The user support will be provided for as long as TODCO utilizes Transocean's
accounting systems to maintain its accounting records and will be subject to the
same notice period prior to termination as that required in Section 2.2 of
Exhibit I.
4.0 FINANCIAL REPORTING
Transocean will provide general guidance to TODCO using Transocean's normal
in-house resources on:
- new pronouncements issued by the SEC and various other accounting and
regulatory bodies; and
- application of Transocean accounting policies to TODCO's business
activities;
free of charge during the period that TODCO's financial results are fully
consolidated with those of Transocean.
Any draft Public Filing prepared by TODCO and submitted to Transocean, at
Transocean's request, prior to submission will be reviewed by Transocean free of
any charge to TODCO.
Any assistance requested by TODCO in the preparation of any Public Filing will
be invoiced to TODCO at an hourly rate calculated using the Annual Compensation
of the Transocean employee multiplied by a factor of 1.27 and divided by 1,888.
17
EXHIBIT III
TO TRANSITION SERVICES AGREEMENT BETWEEN TODCO AND TRANSOCEAN INC.
INTERNAL AUDIT
--------------
For such time as the Transocean Group holds a majority voting interest in TODCO,
TODCO will utilize the services of the Internal Audit department of the
Transocean Group ("Internal Audit") to carry out routine and non-routine audits
of the TODCO organization and its activities. The audit Services will be
substantially similar in scope, process and work product as those performed by
Internal Audit for the Transocean Group.
At the start of each fiscal year, routine audit work will be planned by Internal
Audit and proposed to TODCO's audit committee for approval.
Internal Audit will perform non-routine audits or special projects at the
request of either the audit committee or executive management of TODCO.
All of the foregoing routine and non-routine work will be invoiced to TODCO at a
daily rate that will vary depending on the job title of the Internal Audit team
members performing the Services.
The daily rate will be calculated using an average Annual Compensation for the
job title grossed up by (i) a burden factor ("Burden Factor") which covers
dental, life insurance, medical and retirement benefits, savings plan matching
and statutory contributions, and (ii) an allocated annual overhead factor. The
allocated annual overhead factor will be determined using Internal Audit's
overhead expenses, including those relating to both the Assistant Vice-President
and the Senior Manager of Internal Audit (or their functional replacements over
time) as well as any administrative support, but excluding all travel, meals and
accommodation expenses (which will be billed separately as reimbursables). The
Service Coordinators shall agree to the actual Burden Factor and allocated
annual overhead factor to be applied in accordance with the foregoing.
The daily rate will be determined by the following formula:
Average Annual Compensation Per Job Title
X (1 + Burden Factor) + Allocated Annual Overhead
__________________________________________
236 working days
The parties agree that the daily rates for Internal Audit Services will be set
at the start of each calendar year. For 2003, the following rates will apply:
Audit Manager: $700 per day
Senior Auditor: $650 per day
Senior IT Auditor: $675 per day
Staff Auditor: $575 per day
Allocated Annual Overhead: $61,910
Travel, meals and accommodations will be invoiced at cost to TODCO.
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EXHIBIT IV
TO TRANSITION SERVICES AGREEMENT BETWEEN TODCO AND TRANSOCEAN INC.
HUMAN RESOURCES SERVICES
------------------------
Transocean Holdings shall provide or cause to be provided to the TODCO Group the
Human Resources related Services described in this Exhibit IV. As used in this
Exhibit, unless the context requires otherwise, "Transocean" shall mean the
Transocean Group, and "TODCO" shall mean the TODCO Group.
1.0 EMPLOYEES SECONDED FROM TRANSOCEAN
1.1 SECONDMENT
If requested by TODCO and subject to mutual written agreement, Transocean will,
from time to time, second certain employees to TODCO. All individuals seconded
to TODCO by Transocean will remain employees of Transocean and the terms and
conditions (including cost and duration) of their secondment will be documented
in a standard agreement signed by both TODCO and Transocean. The parties intend
that TODCO will be billed at a rate equal to Transocean's costs of such
employees and such costs associated with the seconded employees will be billed
monthly to TODCO, without xxxx-up or administration fee. Such costs will
include compensation costs and allowances, social security burdens, company
contributions to deferred benefit and retirement plans and burdens relating to
Transocean's medical, dental and life insurance schemes. Bonus and other
non-monthly payments will be charged pro rata based on the period of secondment.
Incidental business-related expenses incurred by the employee shall be paid
directly by TODCO or re-charged by Transocean to TODCO at cost.
1.2 DURATION
Transocean shall not be obligated to consider a secondment of its employees to
TODCO past the date at which Transocean no longer owns a majority voting
interest in TODCO; provided that any Transocean employees under secondment to
TODCO at the time Transocean no longer retains a majority voting interest may,
upon agreement of the parties, complete the originally agreed period of
secondment. The parties agree that the terms of such secondment shall be
subject to early termination upon Transocean losing its majority voting interest
in TODCO.
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EXHIBIT V
TO TRANSITION SERVICES AGREEMENT BETWEEN TODCO AND TRANSOCEAN INC.
RISK MANAGEMENT, CASH MANAGEMENT & TREASURY SERVICES
----------------------------------------------------
1.0. TRANSFER OF RISK MANAGEMENT FUNCTION.
The Risk Management department of the Transocean Group shall assist in the
initial transfer of risk management responsibilities from the Transocean Group
to the TODCO Group free of charge. No other risk management, cash management
and treasury services shall be provided except as set forth in Section 2.0
below.
2.0. ADDITIONAL RISK MANAGEMENT, CASH MANAGEMENT AND TREASURY SERVICES.
TODCO may request in writing additional risk management, cash management and
treasury services to be provided by the Transocean Group for a period of six
months from the IPO Closing Date. In the event the parties agree as set forth
in Section 2.3 of the Agreement, Transocean Holdings shall provide or cause to
be provided such Services up to a maximum of the six month period. All such
additional Services will be billed at an hourly rate calculated using the
relevant Risk Management or Treasury employee's Annual Compensation multiplied
by a factor of 1.27 and divided by 1,888.
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