Supplemental Agreement to Severance Agreement among Global Marine Inc., GlobalSantaFe Corporation, and W. Matt Ralls

Contract Categories: Human Resources › Severance Agreements
Summary

This agreement, dated January 20, 2003, is between Global Marine Inc., GlobalSantaFe Corporation, and W. Matt Ralls. It supplements and partially replaces a prior severance agreement, clarifying and updating certain terms, including the definition of 'Cause' for termination, retirement benefits, and the executive's salary and bonus structure. The agreement ensures the executive's compensation and benefits are consistent with those of similarly situated executives and specifies that both companies are jointly responsible for all obligations. The agreement remains in effect until the executive leaves the company and receives all due severance payments.

View More
EX-10.25 11 h03375exv10w25.txt SUPPLEMENTAL AGREEMENT TO SEVERANCE AGREEMENT EXHIBIT 10.25 SUPPLEMENTAL AGREEMENT THIS SUPPLEMENTAL AGREEMENT is entered into this 20th day of January, 2003 by and between Global Marine Inc., a Delaware corporation, GlobalSantaFe Corporation, a Cayman Islands corporation, (the "Company"), and W. Matt Ralls (the "Executive"). WHEREAS, the Executive entered into an agreement with Global Marine Inc. dated as of August 16, 2001 (the "Agreement") and the Company has assumed the obligations and liabilities of Global Marine Inc. under the Agreement, and is jointly and severally liable for any and all obligations and liabilities of Global Marine Inc. which have or may hereafter accrue thereunder; WHEREAS, Global Marine Inc., the Company and the Executive desire to enter into a new supplemental agreement (the "Supplemental Agreement"), which Supplemental Agreement shall incorporate the Agreement and will replace and supersede only such terms, provisions, conditions or limitations of the Agreement, if any, that conflict with the terms, provisions, conditions or limitations of the Supplemental Agreement; and WHEREAS, the Company and Global Marine Inc. shall be jointly and severally liable for any and all obligations and liabilities which have or may hereafter accrue under this Supplemental Agreement; NOW, THEREFORE, in consideration of the mutual promises, agreements and covenants and subject to the terms and conditions contained in this Supplemental Agreement, Global Marine Inc., the Company and the Executive hereby agree as follows: 1. Incorporation by Reference. The Agreement is incorporated in this Supplemental Agreement for all purposes of this Supplemental Agreement and, unless otherwise provided in this Supplemental Agreement, the terms, provisions, conditions and limitations of this Supplemental Agreement shall override, replace and supersede any conflicting or inconsistent terms, provisions, conditions and limitations of the Agreement; provided, however, that all terms, provisions, conditions and limitations of the Agreement that are not overridden, replaced and superseded shall be fully operative and shall apply to this Supplemental Agreement including, without limitation, the severance benefits in paragraph 5 of the Agreement and the tax gross up payment in paragraph 9 of the Agreement. 2. Definitions. For purposes of this Supplemental Agreement, capitalized terms not otherwise defined in this Supplemental Agreement shall have the meaning assigned to them by the Agreement as of the Commencement Date of this Supplemental Agreement; provided, however, that, (i) the Commencement Date of the Agreement shall remain unchanged by the Commencement Date of this Supplemental Agreement (thereby preserving the Executive's rights under the Agreement) and (ii) effective as of the Commencement Date of this Supplemental Agreement, the term "Cause" shall be defined for all purposes of the Agreement and this Supplemental Agreement as follows in subparagraph (a) below, and part (d) of the term "Normal Retirement Benefit" as defined in the SERP (as defined in Paragraph 7 of this Supplemental Agreement) shall be revised for all purposes of the Agreement and Paragraph 7 of this Supplemental Agreement and for all purposes of the SERP as it pertains to the Executive, as follows in subparagraph (b) below: (a) Cause. "Cause" means an act or acts of willful misconduct that remains or remain uncorrected for 30 days following written notice by the Company setting forth the particulars thereof in sufficient detail to apprise the Executive of the objectionable conduct and demanding correction and that is or are reasonably determined in good faith by a unanimous affirmative vote of all members of the Compensation Committee of the Board to be demonstrably and materially harmful to the Company or any of its affiliates; provided, however, Cause shall not mean inadequate performance or incompetence and, as a result, any termination of the Executive's employment with the Company or any affiliate controlled by the Company on account of inadequate performance or incompetence shall not constitute termination with Cause. For purposes of the immediately preceding sentence, no act, nor failure to act, shall be considered "willful" unless the Compensation Committee of the Board determines by an affirmative, unanimous vote of all its members that the Executive acted, or failed to act, without a reasonable belief that his action or failure to act was in the best interest of the Company or any of its affiliates. (b) SERP Amendment. Part (d) of the term "Normal Retirement Benefit" (as defined in the SERP) is hereby amended as it pertains to the Executive, effective as provided above, to provide as follows: (d) The monthly benefit payable under any qualified or nonqualified defined benefit plan of the Employers (other than the SERP), assuming the Participant received such benefit in the form of a single life annuity, reduced for early retirement using the applicable early retirement reduction factors in effect under any such qualified or nonqualified defined benefit plan on the date of the computation of such benefit, commencing on the date benefits are paid under this Plan or Paragraph 7 of the Supplemental Agreement between the Company and the Participant, whichever occurs first. 3. Waiver. In consideration for the benefits conferred under this Supplemental Agreement, the Executive consents to and otherwise waives any event occurring on or before January 20, 2003 that would constitute Good Reason under the Agreement. 4. Term. The term ("Term") of this Supplemental Agreement will commence on the date first above written (the "Commencement Date") and will end when the Executive is no longer an employee of the Company and its affiliates and has received all severance payments and benefits to which he is entitled under the Agreement and this Supplemental Agreement. 2 5. Annual Salary. Effective as of November 1, 2002, the Company will pay to the Executive an annual salary ("Annual Salary") at a rate of $400,000 per year. Commencing after January 1, 2003 the Executive's Annual Salary shall be increased annually by a percentage and at a time generally consistent with the percentage increases granted to the seven most highly compensated executives, other than the Executive ("Similarly Situated Executives"), excluding salary increases granted to any Similarly Situated Executives based on promotions, parity adjustments or other circumstances pertaining to specific individuals within that group. Although the Company's compliance or failure to comply with its commitments under this Paragraph 5 of this Supplemental Agreement will be considered in any determination of whether the Executive has Good Reason, for the purposes of such a determination in connection with matters relating to pay increases covered in this Paragraph 5 only, the Executive's good faith determination of the Company's non-compliance shall not be conclusive. 6. Bonus and Other Incentive Compensation. For each partial or complete calendar year during which the Executive agrees to be employed, in accordance with the terms and provisions of this Supplemental Agreement, the Executive shall be eligible to participate in the Management Annual Incentive Plan or its equivalent and, thereunder, shall be entitled to a target bonus rate consistent with those of similarly situated executives; provided, however, that the target rate shall not be less than 65% of his Annual Salary. In addition, the Executive shall also participate in all other forms of incentive compensation granted to and on terms similar to those granted to the Similarly Situated Executives, and in amounts or at levels generally consistent with the allocations of awards among the Similarly Situated Executives for 2002. In determining whether the Executive's awards in future years are generally consistent with the allocation for 2002, awards granted to Similarly Situated Executives shall be disregarded to the extent they are influenced by promotions, parity adjustments or other circumstances pertaining to specific individuals within that group. Although the Company's compliance or failure to comply with its commitments under this Paragraph 6 of this Supplemental Agreement will be considered in any determination of whether the Executive has Good Reason, for the purposes of such a determination in connection with matters covered in this Paragraph 6 only, the Executive's good faith determination of the Company's non-compliance shall not be conclusive. 7. Obligations of the Company Upon Termination of Executive's Employment or Certain Amendments or Termination of the SERP. For purposes of this Paragraph 7, capitalized terms not otherwise defined in this Supplemental Agreement have the meaning assigned to them by the Company's Supplemental Executive Retirement Plan, effective July 1, 2002, and as in effect on the Commencement Date of this Supplemental Agreement ("SERP"). If (a) the Executive's employment with the Company (i) terminates due to death, Disability, Good Reason or the Executive's employment is involuntarily terminated without Cause or (ii) is terminated by the Company or by the Executive for any reason (including, but not limited to, death, Disability, Cause or voluntary termination without Good Reason) after the Executive attains age 58 while in the employ of the Company, or (b) there is any termination or amendment of the SERP, or cessation of benefits thereunder, (i) that would in any way adversely affect the benefits that the Executive has accrued or could have accrued under the SERP if the Executive had remained in the employ of the Company at the same rate of remuneration as in effect on the date of such termination or amendment, or cessation of benefits, until the Executive's Normal Retirement Date under the SERP and (ii) that the Executive fails to consent to in writing, the Executive shall be entitled to immediate vesting of benefits under the SERP as if the Executive had attained age 3 62 and at least 15 years of service thereby entitling the Executive to the Lump-Sum Equivalent (payable within 30 days after the Executive's Date of Termination or the date of adoption and/or approval of such termination or amendment of the SERP, or cessation of benefits under the SERP, as applicable) of the full, unreduced Normal Retirement Benefit as if the Executive had retired on or after the Executive's Normal Retirement Date determined under the SERP. For the purposes of this Paragraph 7, any Bonus taken into account for the purpose of computing the Normal Retirement Benefit shall be the greater of the actual Bonus received or $250,000, and the Executive's Basic Earnings under the SERP shall in no case be assumed to be less than an annual rate of $400,000. See Appendix A, which is incorporated herein and made part of this Supplemental Agreement for all purposes, for examples of how the SERP benefits described in the preceding provisions of this Paragraph 7 shall be calculated. In addition, if the Executive is entitled to SERP benefits under this Paragraph 7, to the extent permitted by applicable governmental laws and regulations, the Executive or the Executive's Beneficiary, as applicable, shall be deemed to have immediate eligibility for any and all non-pension post-retirement benefits under any and all plans and policies of the Company or any affiliate of the Company, as amended and in effect at the Date of Termination, regardless of whether or not the Executive actually retires under any pension or retirement plan. Any payment of the full amount due under this Paragraph 7 will satisfy in full the Company's obligations to the Executive under the SERP and the Company shall thereafter have no further obligation to the Executive under the SERP. 8. The Company represents and warrants that it has assumed the obligations and liabilities of Global Marine Inc. under the Agreement and hereby expressly agrees to be jointly and severally liable with Global Marine Inc. for, any and all obligations and liabilities that have arisen or may hereafter arise under the Agreement and this Supplemental Agreement. Global Marine Inc. hereby expressly agrees to be jointly and severally liable with the Company for any and all obligations and liabilities that have arisen or may hereafter arise under the Agreement and this Supplemental Agreement. IN WITNESS WHEREOF, the parties have executed this Supplemental Agreement as of the date first above written. THE COMPANY: THE EXECUTIVE: GLOBALSANTAFE CORPORATION By: /s/ C. Stedman Garber, Jr. /s/ W. Matt Ralls ------------------------------- ------------------------------------ C. Stedman Garber, Jr. W. Matt Ralls President and Chief Executive Officer GLOBAL MARINE INC. By: /s/ Charles Striedel ------------------------------- Printed Name: Charles Striedel -------------------- Title: President --------------------------- 4 APPENDIX A SUPPLEMENTAL AGREEMENT A-1 GLOBALSANTAFE ESTIMATED BENEFIT ENHANCEMENT ILLUSTRATION
PARTICIPANT DATA Age 53 Service 5.086 2003 Compensation $ 400,000 Target Bonus 65% ASSUMPTIONS Salary increase 5.00% CPI increase 3.00% Pre-retirement interest rate 7.00% Post retirement interest rate
CALCULATION Average compensation - -------------------- Year Age ---- --- 2002 53 453,097 200,000 2003 54 660,000 205,000 2004 55 693,000 210,000 2005 56 727,650 215,000 2006 57 764,033 225,000 2007 58 802,234 230,000 2008 59 -- 235,000 2009 60 -- 245,000 2010 61 -- 250,000 2011 62 -- 260,000
Before Amendment After Amendment Increase --------- --------------- -------- Qualified Plan Assumed retirement age 58 N/A N/A Benefit service 10.0860 N/A N/A Average compensation 211,000 N/A N/A Covered compensation 71,649 N/A N/A Accrued benefit payable at age 65 39,130 N/A N/A Early retirement factor 0.80 N/A N/A Age difference adjustment 0.00 N/A N/A IMMEDIATE BENEFIT 31,304 N/A N/A Lump sum factor N/A N/A N/A LUMP SUM N/A N/A N/A Pension Equity Plan Assumed retirement age 58 N/A N/A Benefit service 10.0860 N/A N/A Average compensation 700,286 N/A N/A Covered compensation 71,649 N/A N/A Gross accrued benefit payable at age 65 137,829 N/A N/A Qualified plan offset 39,130 N/A N/A Accrued benefit payable at age 65 98,699 N/A N/A Early retirement factor 0.80 N/A N/A Age difference adjustment 0.00 N/A N/A IMMEDIATE BENEFIT 78,959 N/A N/A Lump sum factor(1) 12.5262 N/A N/A LUMP SUM 989,059 N/A N/A SERP Assumed retirement age 58 62 N/A Benefit service 10.0860 15 N/A Average compensation 749,466 749,466 N/A Gross accrued benefit payable at age 65 302,365 449,680 N/A Qualified plan and SERP offsets 137,829 110,263 N/A Accrued benefit payable at age 65 164,536 339,417 N/A Early retirement factor 0.80 1.00 N/A Age difference adjustment 0.01 0.01 N/A IMMEDIATE BENEFIT 130,313 336,023 205,710 Lump sum factor(2) 16.9486 16.9486 16.9486 LUMP SUM 2,208,615 5,695,113 3,486,499 Total increase 3,486,499 Present value of increase 2,556,907
1. PEP lump sums are calculated using the blended 1994 Group Annuity Reserving Table and the 30-year Treasury rate for the month of November prior to the beginning of the plan year. We have assumed that the applicable 30-year Treasury rate is 6.00% for this calculation. The actual Treasury rate will be based on the rate in effect at retirement. The lump sum factor is applied to an annual single life annuity benefit. 2. SERP lump sums are calculated using the blended 1994 Group Annuity Reserving Table and the lesser of a 5.00% interest rate or the average monthly Pension Benefit Guaranty Corporation immediate and deferred interest rate for the preceding calendar quarter. We have assumed that the applicable interest rate is 5.00% for this calculation. The actual interest rate will be determined at retirement and will not exceed 5.00%. The lump sum factor is applied to an annual 100% joint and survivor annuity benefit and assumes that the participant's spouse is 10 years and 10 months younger than the participant. A-2 GLOBALSANTAFE ESTIMATED BENEFIT ENHANCEMENT ILLUSTRATION
PARTICIPANT DATA Age 53 Service 5.086 2003 Compensation $ 400,000 Target Bonus 65% ASSUMPTIONS Salary increase 5.00% CPI increase 3.00% Pre-retirement interest rate 7.00% Post retirement interest rate
CALCULATION Average compensation - -------------------- Year Age ---- --- 1998 49 195,082 200,000 1999 50 223,307 200,000 2000 51 317,875 200,000 2001 52 455,991 200,000 2002 53 453,097 200,000 2003 54 660,000 205,000 2004 55 693,000 210,000
Before Amendment After Amendment Increase --------- --------------- -------- Qualified Plan Assumed retirement age 55 N/A N/A Benefit service 7.0860 N/A N/A Average compensation 201,000 N/A N/A Covered compensation 68,400 N/A N/A Accrued benefit payable at age 65 26,183 N/A N/A Early retirement factor 0.65 N/A N/A Age difference adjustment 0.00 N/A N/A IMMEDIATE BENEFIT 17,019 N/A N/A Lump sum factor N/A N/A N/A LUMP SUM N/A N/A N/A Pension Equity Plan Assumed retirement age 55 N/A N/A Benefit service 7.0860 N/A N/A Average compensation 476,848 N/A N/A Covered compensation 68,400 N/A N/A Gross accrued benefit payable at age 65 65,277 N/A N/A Qualified plan offset 26,183 N/A N/A Accrued benefit payable at age 65 39,094 N/A N/A Early retirement factor 0.65 N/A N/A Age difference adjustment 0.00 N/A N/A IMMEDIATE BENEFIT 25,411 N/A N/A Lump sum factor 13.1493 N/A N/A LUMP SUM 334,138 N/A N/A SERP Assumed retirement age 55 62 N/A Benefit service 7.0860 15 N/A Average compensation 569,112 661,694 N/A Gross accrued benefit payable at age 65 161,309 397,016 N/A Qualified plan and SERP offsets 65,277 42,430 N/A Accrued benefit payable at age 65 96,032 354,586 N/A Early retirement factor 0.65 1.00 N/A Age difference adjustment 0.01 0.01 N/A IMMEDIATE BENEFIT 61,797 351,040 289,243 Lump sum factor 17.4208 17.4208 17.4208 LUMP SUM 1,076,546 6,115,399 5,038,853 Total increase 5,038,853 Present value of increase 4,526,978
1. PEP lump sums are calculated using the blended 1994 Group Annuity Reserving Table and the 30-year Treasury rate for the month of November prior to the beginning of the plan year. We have assumed that the applicable 30-year Treasury rate is 6.00% for this calculation. The actual Treasury rate will be based on the rate in effect at retirement. The lump sum factor is applied to an annual single life annuity benefit. 2. SERP lump sums are calculated using the blended 1994 Group Annuity Reserving Table and the lesser of a 5.00% interest rate or the average monthly Pension Benefit Guaranty Corporation immediate and deferred interest rate for the preceding calendar quarter. We have assumed that the applicable interest rate is 5.00% for this calculation. The actual interest rate will be determined at retirement and will not exceed 5.00%. The lump sum factor is applied to an annual 100% joint and survivor annuity benefit and assumes that the participant's spouse is 10 years and 10 months younger than the participant. A-3 GLOBALSANTAFE ESTIMATED EXECUTIVE BENEFIT CALCULATION DEVELOPMENT OF ESTIMATED AVERAGE ANNUAL COMPENSATION
MINIMUM SUPPLEMENTAL TOTAL COMPENSATION AGREEMENT YEAR AGE BASE PAY BONUS COMPENSATION LIMIT COMPENSATION ---- --- -------- ----- ------------ ----- ------------ 1998 49 195,082 * 195,082 200,000 650,000 1999 50 223,307 * 223,307 200,000 650,000 2000 51 317,875 * 317,875 200,000 650,000 2001 52 455,990 * 455,990 200,000 650,000 2002 53 453,097 * 453,097 200,000 650,000 2003 54 400,000 260,000 660,000 205,000 660,000 2004 55 420,000 273,000 693,000 210,000 693,000 2005 56 441,000 286,650 727,650 215,000 727 ###-###-#### 57 463,050 300,983 764,033 225,000 764,033 2007 58 486,203 316,032 802,234 230,000 802 ###-###-#### 59 510,513 331,833 842,346 235,000 842 ###-###-#### 60 536,038 348,425 884,463 245,000 884 ###-###-#### 61 562,840 365,846 928,686 250,000 928 ###-###-#### 62 590,982 384,138 975,121 260,000 975,121
QUALIFIED PLAN
AGE 55 AGE 58 -------------------------------------------- -------------------------------------------- Year Earnings Months Year Earnings Months ---- -------- ------ ---- -------- ------ 2004 119,577 7 2007 131,243 7 2003 202,084 12 2006 219,167 12 2002 200,000 12 2005 212,084 12 2001 200,000 12 2004 207,084 12 2000 200,000 12 2003 202,084 12 1999 83,340 5 2002 83,340 5 --------- -- --------- -- TOTAL 1,005,000 60 1,055,000 60 AVERAGE ANNUAL EARNINGS 201,000 211,000
PEP
AGE 55 AGE 58 -------------------------------------------- -------------------------------------------- Year Earnings Months Year Earnings Months ---- -------- ------ ---- -------- ------ 2004 404,227 7 2007 467,943 7 2003 660,000 12 2006 764,033 12 2002 453,097 12 2005 727,650 12 2001 455,990 12 2004 693,000 12 2000 317,875 12 2003 660,000 12 1999 93,052 5 2002 188,806 5 --------- -- --------- -- TOTAL 2,384,241 60 3,501,431 60 AVERAGE ANNUAL EARNINGS 476,848 700,286
SERP
AGE 55 AGE 58 -------------------------------------------- -------------------------------------------- Year Earnings Months Year Earnings Months ---- -------- ------ ---- -------- ------ 2004 404,227 7 2007 467,943 7 2003 660,000 12 2006 764,033 12 2002 453,097 12 2005 727,650 12 2001 190,011 5 2004 288,773 5 -------- -- --------- -- TOTAL 1,707,335 36 2,248,399 36 AVERAGE ANNUAL EARNINGS 569,112 749,466
SUPPLEMENTAL AGREEMENT
AGE 55 AGE 58 -------------------------------------------- -------------------------------------------- Year Earnings Months Year Earnings Months ---- -------- ------ ---- -------- ------ 2004 404,227 7 2007 467,943 7 2003 660,000 12 2006 764,033 12 2002 650,000 12 2005 727,650 12 2001 270,855 5 2004 288,773 5 --------- -- --------- -- TOTAL 1,985,082 36 2,248,399 36 AVERAGE ANNUAL EARNINGS 661,694 749,466
* Includes base pay and bonus since the breakout between the two sources of pay was not available. Bonuses are assumed to accrue ratably over the year. Compensation is assumed to increase 5% per year and CPI is assumed to increase at 3% per year. A-4