EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered into this ____
day of March, 2003, but effective as of March 31, 2003 (the "Effective Date"),
by and between GREY WOLF, INC., a Texas corporation (the "Company"), and XXXXXXX
X. XXXXXX (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 the first anniversary of the Effective Date (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 two hundred sixty thousand dollars
($260,000.00) 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. On the Effective Date, the Executive shall have earned,
and the Company shall pay to the Executive, a signing bonus in the amount of
$350,000 (the "Signing Bonus"). In addition, 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").
2.3 Vacation Policy. The Executive shall be entitled to three (3) weeks
of paid vacation during each year of the Term until Executive has been employed
by the Company for ten (10) years when the Executive shall be entitled to four
(4) 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 $40,000 (the "Auto Allowance"); provided,
however, the Auto Allowance shall be increased effective January 1, 2003 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. The Company shall reimburse the
Executive for up to $400 per month for club dues and expenses at the Houston
Country Club and the Houstonian, or any comparable clubs or organizations, to
the extent the Executive incurs such dues and expenses during the Term.
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
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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 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.
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
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such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim;
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 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 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
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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.
2.8 Other Additional Payments by the Company. The Company and the
Executive acknowledge that (i) the Executive is a party to an Amended and
Restated Employment Agreement dated August 6, 2002 between ENSCO International
Incorporated ("ENSCO") and the Executive (the "Prior Employment Agreement"),
(ii) under the terms of the Prior Employment Agreement, the Executive is
entitled to receive severance payments from ENSCO in the amount of $22,666.67
per month (the "Severance Payments"), and (iii) the Severance Payments are
payable by ENSCO to the Executive for the period beginning on March 15, 2003
through August 7, 2005, provided that the Executive does not compete (as
described in Section 3.1 of the Prior Employment Agreement) in the business of
constructing, owning, managing and operating offshore drilling rigs and hiring
and managing crews to operate such rigs, which equipment and crews are
contracted or hired by third parties for the purpose of drilling oil and gas
xxxxx offshore (the "Offshore Drilling Business"). The Company agrees that if
the Company directly or indirectly engages in any aspect of the Offshore
Drilling Business and ENSCO ceases payment of the Severance Payments to the
Executive, then the Company shall reimburse the Executive for the Severance
Payments that otherwise would have been payable by ENSCO to the Executive under
the terms of the Prior Employment Agreement through August 7, 2005. The maximum
amount payable by the Company to the Executive under this Section 2.8 shall not
exceed $657,343, and such amount shall be reduced by the amount of the Severance
Payments paid by ENSCO to the Executive. The obligations of the Company under
this Section 2.8 shall survive any termination of this Agreement.
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 (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
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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; provided,
however, that if the Company shall have terminated the Executive's employment
for Cause and such Cause in fact exists or if the Executive shall have
terminated his employment with the Company in breach of the terms of this
Agreement, 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
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 Intellectual Property 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 Intellectual Property
Information is necessary to fulfill his responsibilities as an employee of the
Company. The Executive understands that confidential matters 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
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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 the 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 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:
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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 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, the Signing Bonus 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.
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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 Signing Bonus and
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 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 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; and
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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 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 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 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, Signing Bonus, 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
10
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, Signing Bonus, 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
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 fixed 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; (xi) 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
11
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 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.
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 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 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
12
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 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, by law, 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.
6.4 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 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 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 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 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 Certain Definitions. As used in this Agreement, the following terms
have the following meanings unless the context otherwise requires:
13
(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, joint 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.
7.2 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:
Xxxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Any party may change its address for notice hereunder by notice to the other
party hereto.
7.3 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.
7.4 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.
7.5 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
14
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.
7.6 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.
7.7 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.
7.8 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.
7.9 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.
7.10 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.
7.11 Dispute Resolution. If any dispute arises out of or relates to
this Agreement, or the breach thereof, 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, 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.
7.12 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EXECUTIVE
-----------------------------------------------
XXXXXXX X. XXXXXX
COMPANY
GREY WOLF, INC.
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XXXXXX X. XXXXXXXX,
Chairman, President and Chief Executive Officer
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