Exhibit 10.4


 


EMPLOYMENT
AND NON-COMPETITION AGREEMENT


 


BETWEEN


 


VANTAGE
DRILLING COMPANY


 


AND


 


PAUL
A. BRAGG


 


DATED
JUNE 12, 2008


 

















 


TABLE
OF CONTENTS


 


	
   

  	
   

  	
   

  	
  Page

  
	
  1.

  	
  EMPLOYMENT TERM AND DUTIES

  	
  1

  
	
   

  	
  1.1

  	
  Term of Employment

  	
  1

  
	
   

  	
  1.2

  	
  Duties as Employee of the Company

  	
  1

  
	
   

  	
  1.3

  	
  Place of Performance

  	
  2

  
	
   

  	
  1.4

  	
  Fiduciary Duty

  	
  2

  
	
   

  	
  1.5

  	
  Compliance

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  COMPENSATION AND RELATED MATTERS

  	
  2

  
	
   

  	
  2.1

  	
  Base Salary

  	
  2

  
	
   

  	
  2.2

  	
  Bonus Payments

  	
  2

  
	
   

  	
  2.3

  	
  Expenses

  	
  3

  
	
   

  	
  2.4

  	
  Automobiles

  	
  3

  
	
   

  	
  2.5

  	
  Business, Travel and Entertainment Expenses

  	
  3

  
	
   

  	
  2.6

  	
  Vacation

  	
  3

  
	
   

  	
  2.7

  	
  Welfare, Pension and Incentive Benefit Plans

  	
  3

  
	
   

  	
  2.8

  	
  Dues

  	
  3

  
	
   

  	
  2.9

  	
  Other Benefits

  	
  3

  
	
   

  	
  2.10

  	
  Perquisites

  	
  4

  
	
   

  	
  2.11

  	
  Proration

  	
  4

  
	
   

  	
  2.12

  	
  Intentionally Left Blank

  	
  4

  
	
   

  	
  2.13

  	
  Additional Payments

  	
  4

  
	
   

  	
   

  	
  (a)     Excise Tax; Gross-Up Payment

  	
  4

  
	
   

  	
   

  	
  (b)     Accounting Firm Determinations

  	
  5

  
	
   

  	
   

  	
  (c)     Notification of Claims

  	
  5

  
	
   

  	
   

  	
  (d)     Refund

  	
  6

  
	
   

  	
   

  	
  (e)     Insurance

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  TERMINATION

  	
  7

  
	
   

  	
  3.1

  	
  Definitions

  	
  7

  
	
   

  	
  3.1.2

  	
  Notice to Cure

  	
  7

  
	
   

  	
  3.2

  	
  Termination Date

  	
  10

  
	
   

  	
  3.3

  	
  Constructive Termination Without Cause

  	
  10

  
	
   

  	
  3.4

  	
  Termination Without Cause or Termination For Good Reason or
  Constructive Termination Without Cause: Benefits

  	
  10

  
	
   

  	
  3.5

  	
  Base Salary

  	
  11

  
	
   

  	
  3.6

  	
  Stock Awards

  	
  11

  
	
   

  	
  3.7

  	
  Other Benefits

  	
  11

  
	
   

  	
  3.8

  	
  Expenses

  	
  11

  
	
   

  	
  3.9

  	
  Mitigation

  	
  11

  
	
   

  	
  3.10

  	
  Maximum Payments

  	
  11

  
	
   

  	
  3.11

  	
  Net After-Tax Benefit

  	
  12

  
	
   

  	
  3.12

  	
  Termination In Event of Death: Benefits

  	
  12

  
	
   

  	
  3.13

  	
  Termination In Event of Disability: Benefits

  	
  12

  



 


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  3.14

  	
  Voluntary Termination by Employee and Termination for Cause: Benefits

  	
  13

  
	
   

  	
  3.15

  	
  Termination Procedure

  	
  13

  
	
   

  	
   

  	
  A.     Notice of Termination

  	
  13

  
	
   

  	
   

  	
  B.     Date of Termination

  	
  13

  
	
   

  	
   

  	
  C.     Mitigation

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  DIRECTOR POSITIONS

  	
  14

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  NON-COMPETITION, NON-SOLICITATION, AND
  CONFIDENTIALITY

  	
  14

  
	
   

  	
  5.1

  	
  Non-Competition During Employment

  	
  14

  
	
   

  	
  5.2

  	
  Conflicts of Interest

  	
  14

  
	
   

  	
  5.3

  	
  Non-Competition After Termination

  	
  14

  
	
   

  	
  5.4

  	
  Non-Solicitation of Customers

  	
  15

  
	
   

  	
  5.5

  	
  Non-Solicitation of Employees

  	
  15

  
	
   

  	
  5.6

  	
  Confidential Information

  	
  15

  
	
   

  	
  5.7

  	
  Original Material

  	
  16

  
	
   

  	
  5.8

  	
  Return of Documents, Equipment, Etc.

  	
  16

  
	
   

  	
  5.9

  	
  Reaffirm Obligations

  	
  16

  
	
   

  	
  5.10

  	
  Prior Disclosure

  	
  16

  
	
   

  	
  5.11

  	
  Confidential Information of Prior Companies

  	
  17

  
	
   

  	
  5.12

  	
  Rights Upon Breach

  	
  17

  
	
   

  	
   

  	
  (a)     Specific Performance

  	
  17

  
	
   

  	
   

  	
  (b)     Accounting

  	
  17

  
	
   

  	
  5.13

  	
  Remedies For Violation of Non-Competition or Confidentiality
  Provisions

  	
  17

  
	
   

  	
  5.14

  	
  Severability of Covenants

  	
  18

  
	
   

  	
  5.15

  	
  Court Review

  	
  18

  
	
   

  	
  5.16

  	
  Enforceability in Jurisdictions

  	
  18

  
	
   

  	
  5.17

  	
  Extension of Post-Employment Restrictions

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  INDEMNIFICATION  

  	
  18

  
	
   

  	
  6.1

  	
  General

  	
  18

  
	
   

  	
  6.2

  	
  Expenses

  	
  19

  
	
   

  	
  6.3

  	
  Enforcement

  	
  19

  
	
   

  	
  6.4

  	
  Partial Indemnification

  	
  19

  
	
   

  	
  6.5

  	
  Advances of Expenses

  	
  19

  
	
   

  	
  6.6

  	
  Notice of Claim

  	
  19

  
	
   

  	
  6.7

  	
  Defense of Claim

  	
  19

  
	
   

  	
  6.8

  	
  Non-exclusivity

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  LEGAL FEES AND EXPENSES

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  BREACH

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  RIGHT TO ENTER AGREEMENT

  	
  21

  



 


ii

















 


	
  10.

  	
  COMPLIANCE WITH SECTION 409A

  	
  21

  
	
   

  	
  10.2     Certain Definitions

  	
  21

  
	
   

  	
  10.3     Delay in Payments

  	
  21

  
	
   

  	
  10.4     Reformation

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  ENFORCEABILITY

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  SURVIVABILITY

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  ASSIGNMENT

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  BINDING AGREEMENT

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  NOTICES

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  WAIVER

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  SEVERABILITY

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  ARBITRATION

  	
  23

  
	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
  ENTIRE AGREEMENT

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
  SECTION HEADINGS

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
  MODIFICATION OF AGREEMENT

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
  UNDERSTANDING OF AGREEMENT

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  23.

  	
  GOVERNING LAW

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  24.

  	
  WITHHOLDING

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  25.

  	
  JURISDICTION AND VENUE

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  26.

  	
  NO PRESUMPTION AGAINST INTEREST

  	
  25

  



 


iii

















 


EMPLOYMENT
AND NON-COMPETITION AGREEMENT


 


This Employment and Non-Competition Agreement
(“Agreement”)
is entered into as of the 12th
day of June, 2008 (the “Effective
Date”), between Vantage Drilling Company, a Cayman
islands corporation (“Company”),
and Paul A. Bragg (“Employee”
or “Executive”).


 


RECITALS:


 


WHEREAS, Executive is to be employed as an
integral part of its management who participates in the decision-making process
relative to short and long-term planning and policy for the Company, will serve
on the Company’s Executive Management Committee;


 


WHEREAS, the Company desires to obtain
assurances from the Executive that he will devote his best efforts to the
Company and will not enter into competition with the Company, solicit its
customers, or solicit employees of the Company after termination of his employment;


 


WHEREAS, Executive will serve as a key
employee with special and unique talents and skills of peculiar benefit and
importance to the Company; and


 


WHEREAS, Executive is desirous of committing
himself to serve on the terms herein provided; and


 


NOW, THEREFORE, in consideration of the
foregoing and of the respective covenants and agreements set forth below, the
Parties agree as follows:


 


1.                                                                                                                                      EMPLOYMENT
TERM AND DUTIES


 


1.1          Term
of Employment.  Effective as of the Effective Date,
the Company hereby agrees to employ Executive as its Chief Executive Officer,
and Executive hereby agrees to accept such employment, on the terms and
conditions set forth herein, for the period commencing on the Effective
Date and expiring as of June 12, 2010 (the “Basic Term”) (unless sooner
terminated as hereinafter set forth). The Basic Term shall be automatically
extended for successive terms of one (1) year commencing on each
Anniversary of the Effective 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 (a “Notice
of Non-Renewal”), in which event the Termination Date shall not
be less than one (1) year following receipt of the Notice of Non-Renewal.


 


1.2          Duties
as Employee of the Company.  Executive shall, subject
to the supervision of the Board, have general executive management and control
of the Company in the ordinary course of its business with all such powers with
respect to such management and control as may be reasonably incident to such
responsibilities.  Executive shall devote his normal and regular business
time, attention and skill to diligently attending to the business of the
Company during the Basic Term. During the Basic Term, Executive shall not
directly or indirectly render any services of a business, commercial, or
professional nature to any other person, firm, corporation, 


 


1

















 


or organization, whether for compensation or otherwise, without the
prior written consent of the Chairman of the Board.  Notwithstanding the
foregoing, it shall not be a violation of the Agreement for Executive to (i) serve
on corporate, civic or charitable boards or committees, (ii) deliver
lectures, fulfill speaking engagements or teach at educational institutions,
and (iii) manage personal investments so long as such activities do not
materially interfere or conflict with the performance of his duties to the
Company hereunder.  The conduct of such activity shall not be deemed to
materially interfere or conflict with Executive’s performance of his duties
until Executive has been notified in writing thereof and given a reasonable
period in which to cure the same.


 


1.3          Place
of Performance.  During the Employment Period, the
Company shall maintain its executive offices in Houston, Texas, and the
Executive shall not be required to relocate to any other location.  During
the Employment Period, the Company shall provide the Executive with an office
and staff and other such facilities and services as shall be suitable to
Executive’s position and adequate for the performance of Executive’s duties
hereunder.


 


1.4          Fiduciary
Duty.  Executive acknowledges and agrees that he owes
a fiduciary duty to the Company, and further agrees to make full disclosure to
the Company of all business opportunities pertaining to the Company’s business
and shall not act for his own benefit concerning the subject matter of his
fiduciary relationship.


 


1.5          Compliance.  Executive
agrees that he will not take any action which he knows would not comply with
United States law as applicable to Executive’s employment, including, but
without limitation to the Foreign Corrupt Practices Act.


 


2.                                                                                                                                      COMPENSATION
AND RELATED MATTERS


 


2.1          Base
Salary.  Executive shall receive a base salary (the “Base Salary”) paid by
the Company at the annual rate of Five Hundred Thousand ($500,000.00) U.S.,
payable not less frequently than in substantially equal monthly installments,
with the opportunity to increases, from time to time thereafter which are in
accordance with the Company’s regular executive compensation practices.


 


2.2          Bonus
Payments.  For each full fiscal year of the Company
that begins and ends during the Employment Period, and for the portion of the
fiscal year of the Company that begins in 2008 (“Fiscal Year 2008”), the Executive shall
be eligible to earn an annual cash bonus in such amount as shall be determined
by the Compensation Committee of the Board (the “Compensation Committee”) (the “Annual Bonus”) based
on the achievement by the Company of performance goals established by the
Compensation Committee for each such fiscal year (or portion of Fiscal Year
2008).  The Compensation Committee shall establish objective criteria to
be used to determine the extent to which performance goals have been
satisfied.  For purposes of this Agreement, net earnings per share is defined
as the Company’s consolidated net earnings per share as reported in the Company’s
Annual Report on Form 10-K.  The Executive’s annual bonus
potential target shall not be less than one hundred percent (100%) of Base
Salary.


 


2

















 


2.3          Expenses.  During
the Basic Term, Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by him in accordance with the policies and
procedures established by the Compensation Committee for the Company’s senior
executive officers in performing services hereunder, provided that Executive
properly accounts for such expenses in accordance with the Company’s policies
and procedures.


 


2.4          Automobiles.  The
Company shall provide the Executive with an automobile allowance of $750.00 per
month consistent with the practices of the Company.


 


2.5          Business,
Travel and Entertainment Expenses.  The Company shall
promptly reimburse the Executive for all business, travel and entertainment
expenses consistent with the Executive’s titles and the practices of the
Company.


 


2.6          Vacation.  The
Executive shall be entitled to four (4) weeks of vacation per year.
Vacation not taken during the applicable fiscal year (but not in excess of two (2) weeks)
shall be carried over to the next following fiscal year.


 


2.7          Welfare,
Pension and Incentive Benefit Plans.  During the
Employment Period, the Executive (and his eligible spouse and dependents) shall
be entitled to participate in all the welfare benefit plans and programs
maintained by the Company from time-to-time for the benefit of its senior
executives including, without limitation, all medical, hospitalization, dental,
disability, accidental death and dismemberment and travel accident insurance
plans and programs. In addition, during the Employment Period, the Executive
shall be eligible to participate in all pension, retirement, savings and other
employee benefit plans and programs maintained from time-to-time by the Company
for the benefit of its senior executives, other than any annual cash incentive
plan.


 


2.8          Dues.  During
the Employment Period, the Company shall pay or promptly reimburse the
Executive for annual dues for membership in professional organizations relevant
to Executive’s job responsibilities.


 


2.9          Other
Benefits.  Executive shall be entitled to participate
in or receive benefits under any compensatory employee benefit plan or other
arrangement made available by the Company now or in the future to its senior
executive officers and key management employees, subject to and on a basis
consistent with the terms, conditions, and overall administration of such plan
or arrangement. Nothing paid to Executive under any plan or arrangement
presently in effect or made available in the future shall be deemed to be in
lieu of the Base Salary payable to Executive pursuant to Section 2.1 of
this Agreement.  The Company shall not make any changes in any employee
benefit plans or other arrangements in effect on the date hereof or
subsequently in effect in which Executive currently or in the future
participates (including, without limitation, each pension and retirement plan,
supplemental pension and retirement plan, savings and profit sharing plan,
stock or unit ownership plan, stock or unit purchase plan, stock or unit option
plan, life insurance plan, medical insurance plan, disability plan, dental
plan, health and accident plan, or any other similar plan or arrangement) that
would adversely affect Executive’s rights or benefits thereunder, unless such
change occurs pursuant to a program applicable to substantially all executives
of the Company and does not result in a proportionately greater reduction in
the 


 


3

















 


rights of or benefits to Executive as compared with any other executive
of the Company.  The Company shall recommend that Executive receive
an annual award of restricted stock and/or stock options in Vantage Drilling
Company in the amount of approximately Two Million One Hundred Thousand Dollars
($2,100,000) based on market studies of industry executives, but Executive
recognizes and agrees that future years could vary significantly as market
conditions and industry compensation trends change.  If there is a Change of Control (as herein
defined), any Stock
Awards (as herein defined) which Executive has received under this
Agreement shall vest immediately.


 


2.10        Perquisites.  Executive
shall be entitled to receive the perquisites and fringe benefits appertaining
to an executive officer of the Company, in accordance with any practice
established by the Compensation Committee.  In addition to the other
benefits provided in this Agreement, Executive and his family shall be entitled
to receive medical insurance as that may be provided under the Company’s group
program, as such group program may be changed from time-to-time in the future,
and Executive shall be entitled to continue to be covered by such group program
or, if not permitted under the terms of the group program, then the Company
shall provide Executive with a medical insurance policy providing substantially
similar benefits as to the group program, for the period ending on the date of
the later to die of Executive or, if Executive is married on the date of his
death, Executive’s spouse.  Executive shall be entitled to receive the
medical benefits defined herein at no cost to the Executive.  However,
Executive’s rights pursuant to this subsection shall be void if Executive is
terminated for Cause or if Executive voluntarily terminates his employment.


 


2.11        Proration.  Any
payments or benefits payable to Executive hereunder in respect of any calendar
year during which Executive is employed by the Company for less than the entire
year, unless otherwise provided in the applicable plan or arrangement, shall be
prorated in accordance with the number of days in such calendar year during
which he is so employed.


 


2.12        Intentionally left blank.


 


2.13        Additional
Payments.


 


(a)           
Excise Tax; Gross-Up Payment.  Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by the Company to or for benefit of
the Executive (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, but determined without regard to
any additional payments required under this Section (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 


 


4

















 


Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.


 


(b)           
Accounting Firm Determinations.  All
determinations required to be made under this Section 2.13, 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 a reputable accounting firm selected by the Company (the “Accounting Firm”),
which shall provide detailed supporting calculations both to the Company and
the Executive within fifteen (15) business days after 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 of the Company, the Executive shall appoint another reputable
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, shall be paid by the
Company to the Executive within five (5) days after 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 that will not have been made by the Company should have been
made (an “Underpayment”),
consistent with the calculations required to be made hereunder.  In the
event that the Company exhausts its remedies pursuant to this Section and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment and any
applicable penalty that has occurred and the amount of any such Underpayment
and any applicable penalty shall be promptly paid by the Company to or for the
benefit of the Executive.


 


(c)           
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 the Executive gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due).  If the Company
notifies the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:


 


1.             give the Company any information
reasonably requested by the Company relating to such claim;


 


5

















 


2.             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;


 


3.             cooperate with the Company in good
faith in order to effectively contest such claim; and


 


4.             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, 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 sue 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 sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.


 


(d)           
Refund.  If,
after the receipt by the Executive of an amount advanced by the Company
pursuant to this Section, 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 this Section) 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 this Section, a determination
is made that the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the expiration of 


 


6

















 


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.


 


(e)           
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.


 


3.                                                                                                                                      TERMINATION


 


3.1          Definitions.


 


A.              “Cause” shall mean:


 


(i)              Material
dishonesty which is not the result of an inadvertent or innocent mistake of
Executive with respect to the Company or any of its subsidiaries;


 


(ii)            Willful
misfeasance or nonfeasance of duty by Executive intended to injure or having
the effect of injuring in some material fashion the reputation, business, or
business relationships of the Company or any of its subsidiaries or any of
their respective officers, directors, or employees;


 


(iii)          Material violation
by Executive of any material term of this Agreement;


 


(iv)          Conviction of
Executive of any felony, any crime involving moral turpitude or any crime other
than a vehicular offense which could reflect in some material fashion
unfavorably upon the Company or any of its subsidiaries; or


 


(v)            Violation of Sections 1.3 or 1.4 above.


 


3.1.2       Notice
to Cure.  Executive may not be terminated for Cause
unless and until there has been delivered to Executive written notice from the
Board supplying the particulars of Executive’s acts or omissions that the Board
believes constitute Cause, a reasonable period of time (not less than 30 days)
has been given to Executive after such notice to either cure the same or to
meet with the Board, with his attorney if so desired by


 


7
















 


Executive, and
following which the Board by action of not less than two-thirds of its members
furnishes to Executive a written resolution specifying in detail its findings
that Executive has been terminated for Cause as of the date set forth in the
notice to Executive.


 


3.1.3         A.          For purposes of this Agreement, no act or failure to act by
the Executive shall be considered “willful” if such act is done by the
Executive in the good faith belief that such act is or was to be beneficial to
the Company or one or more of its businesses, or such failure to act is due to
the Executive’s good faith belief that such action would be materially harmful
to the Company or one of its businesses.  Cause shall not exist unless and
until the Company has delivered to the Executive a copy of a resolution duly
adopted by a majority of the Board (excluding the Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose after reasonable (but in no event less than thirty days’) notice to the
Executive and an opportunity for the Executive, together with his counsel, to
be heard before the Board, finding that in the good faith opinion of the Board
that “Cause” exists, and specifying the particulars thereof in detail. 
This Section shall not prevent the Executive from challenging in an
arbitration proceeding the Board’s determination that Cause exists or that the
Executive has failed to cure any act (or failure to act) that purportedly
formed the basis for the Board’s determination.


 


B.            A “Change
of Control” shall be deemed to have
occurred if:


 


(i)            A reverse merger
involving the Company or the Parent in which the Company or the Parent, as the
case may be, is the surviving corporation but the shares of common stock of the
Company or the Parent (the “Common Stock”) outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise, and the shareholders of the Parent
immediately prior to the completion of such transaction hold, directly or
indirectly, less than fifty percent (50%) of the beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rules) of the surviving entity or, if more than one entity
survives the transaction, the controlling entity; or


 


(ii)           Any “person” or “group”
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934) other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of 50% or more of the Company’s then outstanding
voting common stock; or


 


(iii)          At any time during
the period of three (3) consecutive years (not including any period prior
to the date hereof), individuals who at the beginning of such period
constituted the Board (and any new 


 


8

















 


director whose
election by the Board or whose nomination for election by the Company’s
shareholders were approved by a vote of at least two-thirds of the directors
then still in office who either were directors at the beginning of such period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority thereof; or


 


(iv)          The shareholders of
the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation (a) in which a majority
of the directors of the surviving entity were directors of the Company prior to
such consolidation or merger, and (b) which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being changed into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of the surviving entity outstanding immediately after
such merger or consolidation; or


 


(v)           The shareholders
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company’s
assets.


 


C.            A “Disability” shall mean the absence of Executive from Executive’s duties with the
Company on a full-time basis for 180 consecutive days, or 180 days in a 365-day
period, as a result of incapacity due to mental or physical illness which
results in the Executive being unable to perform the essential functions of his
position, with or without reasonable accommodation.


 


D.            A “Good
Reason” shall mean any of the following (without Executive’s
express written consent):


 


(i)            Following a Change
of Control, a material alteration in the nature or status of Executive’s title,
duties or responsibilities, or the assignment of duties or responsibilities
inconsistent with Executive’s status, title, duties and responsibilities;


 


(ii)           A failure by the
Company to continue in effect any employee benefit plan in which Executive was
participating, or the taking of any action by the Company that would adversely
affect Executive’s participation in, or materially reduce Executive’s benefits
under, any such employee benefit plan, unless such failure or such taking of
any action adversely affects the senior members of corporate management of the
Company generally to the same extent;


 


(iii)          A relocation of the Company’s principal offices, or
Executive’s relocation to any place other than the principal executive 


 


9

















 


offices, exceeding a distance of fifty (50) miles from the Company’s
current executive office located in Houston, Texas, except for reasonably
required travel by Executive on the Company’s business;


 


(iv)          Any material breach
by the Company of any provision of this Agreement;


 


(v)           Any failure by the
Company to obtain the assumption and performance of this Agreement by any
successor (by merger, consolidation, or otherwise) or assign of the Company; or


 


(vi)          The Company provides
written notice of non-renewal to the Executive.


 


However, Good Reason shall exist with respect to an above specified
matter only if such matter is not corrected by the Company within thirty (30)
days of its receipt of written notice of such matter from Executive, and in no
event shall a termination by Executive occurring more than ninety (90) days
following the date of the event described above be a termination for Good
reason due to such event.


 


3.2          Termination
Date.  “Termination Date” shall mean the date
Executive is terminated for any reason pursuant to this Agreement.


 


3.3          Constructive
Termination Without Cause.  “Constructive Termination Without
Cause” shall mean: 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 written consent of the Executive: (i) a reduction in the
Executive’s fixed salary; (ii) 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; (iii) 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; or (iv) the failure by the Company to
indemnify, pay or reimburse the Executive at the time and under the circumstances
required by this Agreement.  Any such termination pursuant to this Section shall
be made by the Executive providing 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 pursuant to this Section shall
be effective sixty (60) days after the date the Executive has given the Company
such written notice setting forth the grounds for such termination with
specificity; provided, however, that the Executive shall not be entitled to
terminate this Agreement in respect of any of the grounds set forth above if
within sixty (60) days after such notice the action constituting such ground
for termination has been cured and is no longer continuing.


 


3.4          Termination
Without Cause or Termination For Good Reason or Constructive Termination
Without Cause: Benefits.


 


10

















 


3.5          Base
Salary and Annual Bonus.  For a period of thirty six
(36) months after the Termination Date, Base Salary and Annual Bonus (as such
terms are defined herein) at the rate, and payable quarterly unless such
termination is by the Company without Cause, in which even such amount of Base
Salary and Annual Bonus shall be paid in a lump sum within ten (10) days
of the Termination Event.


 


3.6          Stock
Awards.  If there is a Change of Control or if there
is a Termination Event, any stock or stock option award issued pursuant to the
2007 Long Term Incentive Compensation Plan (“Stock Awards”) which Executive has
received under this Agreement shall vest immediately and, if there is a
Termination Event, all such Stock Awards shall be exercisable from the date of
such Termination Event for the remainder of their term.


 


3.7          Other
Benefits.  To the extent not theretofore paid or
provided, the Company shall timely pay or provide to Executive any other
amounts or benefits required to be paid or provided or which Executive is
eligible to receive under any plan, program, policy or practice, or contract or
agreement of the Company and its affiliated companies for the period of time
equal to the remainder of the Basic Term (such other amounts and benefits shall
be hereinafter referred to as the “Other Benefits”).  Without limiting
the preceding sentence and without limiting any other provision of this
Agreement, through the remaining Basic Term, but under no condition less than
one (1) year, the Company, at its sole expense, shall continue to provide
(through its own plan and/or individual policies) Executive (and Executive’s
dependents) with health benefits no less favorable than the group health plan
benefits provided during such period to any senior executive officer of the
Company or any affiliated company (to the extent any such coverage or benefits
are taxable to Executive by reason of being provided under a self-insured
health plan of the Company or an affiliate, the Company shall make Executive “whole”
for the same on an after-tax basis).  In any event, the Other Benefits
provided for pursuant to this Section shall be secondary to any benefits
and coverage Executive (or his dependents) receive from another employer.


 


3.8          Expenses.  All
accrued compensation and unreimbursed expenses through the Termination
Date.  Such amounts shall be paid to Executive in a lump sum in cash
within thirty (30) days after the Termination Date; and


 


3.9          Mitigation.  Executive
shall be free to accept other employment during such period, subject to the
limitation as set forth in Section 5
of this Agreement and there shall be no offset of any employment compensation
earned by Executive in such other employment during such period against
payments due Executive under this Section 3, and there shall be no offset
in any compensation received from such other employment against the Base Salary
set forth above.


 


3.10          Maximum
Payments.  It is the objective of this Agreement to
maximize the Executive’s Net After-Tax Benefit (as defined herein) if payments
or benefits provided under this Section are subject to excise tax under Section 4999
of the Code.  Therefore, in the event it is determined that any payment or
benefit by the Company to or for the benefit of the Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Section or
otherwise, including, by example and not by way of limitation, acceleration by
the Company or otherwise of the date of vesting or payment or rate of payment
under any plan, program or 


 


11

















 


arrangement of the Company, would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties 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”), the
Company shall first make a calculation under which such payments or benefits
provided to the Executive under this Agreement are reduced to the extent
necessary so that no portion thereof shall be subject to the excise tax imposed
by Section 4999 of the Code (the “4999 Limit”).  The Company shall then
compare (x) the Executive’s Net After-Tax Benefit assuming application
of  the 4999 Limit with (y) the
Executive’s Net After-Tax Benefit without the application of the 4999 Limit and
the Executive shall be entitled to the greater of (x) or (y).


 


3.11          Net
After-Tax Benefit.  “Net After-Tax Benefit” shall mean the
sum of (i) all payments and benefits which the Executive receives or is
then entitled to receive from the Company, less (ii) the amount of federal
income taxes payable with respect to the payments and benefits described in (i) above
calculated at the maximum marginal income tax rate for each year in which such
payments and benefits shall be paid to the Executive (based upon the rate for
such year as set forth in the Code at the time of the first payment of the
foregoing), less (iii) the amount of excise taxes imposed with respect to
the payments and benefits described in (i) above by Section 4999 of
the Code.  The determination of whether a payment or benefit constitutes
an excess parachute payment shall be made by tax counsel selected by the
Company and reasonably acceptable to the Executive. The costs of obtaining this
determination shall be borne by the Company.


 


3.12          Termination
In Event of Death: Benefits.  If Executive’s
employment is terminated by reason of Executive’s death during the Basic Term,
this Agreement shall terminate, except as provided herein, without further
obligation to Executive’s legal representatives under this Agreement, other
than for payment of all accrued compensation, unreimbursed expenses, the timely
payment or provision of Other Benefits through the date of death, one (1) year’s
Base Salary, and such cash or stock bonus as Executive would otherwise have
been awarded in year if Executive’s death had not occurred.  Such amounts
shall be paid to Executive’s estate or beneficiary, as applicable, in a lump
sum in cash within ninety (90) days after the date of death.  With respect
to the provision of Other Benefits, the term Other Benefits as used in this Section shall
include, without limitation, and Executive’s estate and/or beneficiaries shall
be entitled to receive, benefits at least equal to the most favorable benefits
provided by the Company to the estates and beneficiaries of other executive
level employees of the Company under such plans, programs, practices, and
policies relating to death benefits, if any, as in effect with respect to other
executives and their beneficiaries at any time during the 120-day period
immediately preceding the date of death.  Additionally, all Stock Awards
shall be vested immediately and shall be exercisable for the greater of one
year after the date of such vesting or the remaining term of such option.


 


3.13          Termination
In Event of Disability: Benefits.  If Executive’s
employment is terminated by reason of Executive’s Disability during the Basic
Term, this Agreement shall continue in full force for a period of one (1) year
following such Disability and if such Disability occurs on or after June 1
of any year Executive shall be entitled to the same cash or stock bonus in such
year that Executive would have been awarded if such Disability had not
occurred. In 


 


12

















 


addition, all outstanding Stock Awards shall vest immediately upon such
termination due to Disability.


 


3.14          Voluntary
Termination by Employee and Termination for Cause: Benefits.
Executive may terminate his employment with the Company without Good Reason by
giving written notice of his intent and stating an effective Termination Date
at least ninety (90) days after the date of such notice; provided, however,
that the Company may accelerate such effective date by paying Executive through
the proposed Termination Date and also vesting awards that would have vested
but for this acceleration of the proposed Termination Date and also vesting
awards that would have vested but for this acceleration of the proposed
Termination Date.  Upon such a termination by Executive, except as
provided in Section 5,
or upon termination for Cause by the Company, this Agreement shall terminate
and the Company shall pay to Executive all accrued compensation, unreimbursed
expenses and the Other Benefits through the Termination Date.  Such
amounts shall be paid to Executive in a lump sum in cash within thirty (30)
days after the date of termination.  In addition, all unvested stock
options shall terminate and all vested options will terminate one hundred
twenty (120) days after the Termination Date.


 


3.15          Termination
Procedure.


 


A.            Notice
of Termination.  Any termination of the Executive’s
employment by the Company or by the Executive during the Employment Period
(other than pursuant to Section 3.5)
shall be communicated by written Notice of Termination to the other party. For
purposes of this Agreement, a “Notice of Termination” shall mean a notice indicating
the specific termination provision in this Agreement relied upon and setting
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under that provision.


 


B.            Date
of Termination.  “Date of Termination” shall mean (i) if
the Executive’s employment is terminated by his death, the date of his death, (ii) if
the Executive’s employment is terminated pursuant to Section 3.13,
thirty (30) days after the date of receipt of the Notice of Termination
(provided that the Executive does not return to the substantial performance of
his duties on a full-time basis during such thirty (30) day period), and (iii) if
the Executive’s employment is terminated for any other reason, the date on
which a Notice of Termination is given or any later date (within thirty (30)
days after the giving of such notice) set forth in such Notice of Termination.


 


C.            Mitigation.  The
Executive shall not be required to mitigate damages with respect to the
termination of his employment under this Agreement by seeking other employment
or otherwise, and there shall be no offset against amounts due the Executive
under this Agreement on account of subsequent employment except as specifically
provided in this Agreement. Additionally, amounts owed to the Executive under
this Agreement shall not be offset by any claims the Company may have against
the Executive, and the Company’s obligation to make the payments provided for
in this Agreement, and otherwise to perform its obligations hereunder, shall
not be affected by any other circumstances, including, without limitation, any
counterclaim, recoupment, defense or other right which the Company may have
against the Executive or others.


 


13

















 


4.                                                                                                                                      DIRECTOR
POSITIONS


 


Executive agrees that upon termination of
employment, for any reason, at the request of the Chairman of the Board, he
will immediately tender his resignation from any and all Board positions held
with the Company and/or any of its subsidiaries and affiliates. If Executive
remains as a director, at the election of the Board, after such termination,
Executive shall be compensated as an outside director.


 


5.                                                                                                                                      NON-COMPETITION,
NON-SOLICITATION, AND CONFIDENTIALITY


 


The Company shall provide Executive with its
trade secrets, goodwill, and confidential information of Company and contact
with the Company’s customers and potential customers.  Executive also
recognizes and agrees that the benefit of not being employed at-will, is
provided in consideration for, among other things, the agreements contained in
this Section, as well as the Stock Awards granted to Executive pursuant to this
Agreement.  Executive agrees that the business of the Company is highly
competitive and that the trade secrets, goodwill, and confidential information
of the Company is of primary importance to the success of the Company.  In
consideration of all of the foregoing, and in recognition of these conditions,
and specifically for being provided trade secrets, goodwill, and confidential
information, Executive agrees as follows:


 


5.1          Non-Competition
During Employment.  Executive agrees during the Basic
Term he will not compete with the Company by engaging in the conception,
design, development, production, marketing, or servicing of any product or
service that is substantially similar to the products or services which the
Company provides, and that he will not work for, in any capacity, assist, or became
affiliated with as an owner, partner, etc., either directly or indirectly, any
individual or business which offer or performs services, or offers or provides
products substantially similar to the services and products provided by
Company.


 


5.2          Conflicts
of Interest.  Executive agrees that during the Basic
Term, he will not engage, either directly or indirectly, in any activity (a “Conflict of Interest”)
which might adversely affect the Company or its affiliates, including ownership
of a material interest in any supplier, contractor, distributor, subcontractor,
customer or other entity with which the Company does business or accepting any
material payment, service, loan, gift, trip, entertainment, or other favor from
a supplier, contractor, distributor, subcontractor, customer or other entity
with which the Company does business, and that Executive will promptly inform
the Chairman of the Company as to each offer received by Executive to engage in
any such activity. Executive further agrees to disclose to the Company any
other facts of which Executive becomes aware which might in Executive’s good
faith judgment reasonably be expected to involve or give rise to a Conflict of
Interest or potential Conflict of Interest.


 


5.3          Non-Competition
After Termination.  In further consideration of the
Company providing Employee confidential information, executive agrees that
Executive shall not, at any time during the period of one (1) year after
termination within the geographic area as 


 


14

















 


defined by this Section 5
that the Company has sold products or services or formulated a plan to sell
products or services into a market during the last twelve (12) months of
Executive’s employ, engage in or contribute Executive’s knowledge to any work
which is competitive with or similar to a product, process, apparatus,
services, or development on which Executive worked or with respect to which
Executive had access to Confidential Information while employed by the
Company.  It is understood that the geographical area set forth in this
covenant is divisible so that if this clause is invalid or unenforceable in an
included geographic area, that area is severable and the clause remains in
effect for the remaining included geographic areas in which the clause is
valid. For purposes of this Section 5.3, the geographic area shall apply to the
territory or country where the Company conducts operations.


 


5.4          Non-Solicitation
of Customers.  In further consideration of the Company
providing Employees confidential information, Executive further agrees that for
a period of one (1) year after termination, he will not solicit or
accept any business from any customer or client or prospective customer or
client with whom Executive dealt or solicited while employed by Company during
the last twelve (12) a months of his employment.


 


5.5          Non-Solicitation
of Employees.  Executive agrees that for the duration
of the Basic Term, and for a period of one (1) year after the termination
of the Basic Term, he will not either directly or indirectly, on his own behalf
or on behalf of others, solicit, attempt to hire, or hire any person employed
by Company to work for Executive or for another entity, firm, corporation, or
individual.


 


5.6          Confidential
Information.  Executive further agrees that he will
not, except as the Company may otherwise consent or direct in writing, reveal
or disclose, sell, use, lecture upon, publish or otherwise disclose to any
third party any Confidential Information or proprietary information of the
Company, or authorize anyone else to do these things at any time either during
or subsequent to his employment with the Company.  This Section shall
continue in full force and effect after termination of Executive’s employment
and after the termination of this Agreement.  Executive shall
continue to be obligated under the Confidential Information Section of
this Agreement not to use or to disclose Confidential Information of the
Company so long as it shall not be publicly available.  Executive’s obligations
under this Section with respect to any specific Confidential Information
and proprietary information shall cease when that specific portion of the
Confidential Information and proprietary information becomes publicly known, in
its entirety and without combining portions of such information obtained
separately.  It is understood that such Confidential Information and
proprietary information of the Company include matters that Executive conceives
or develops, as well as matters Executive learns from other employees of
Company. Confidential Information is defined to include information: (1) disclosed
to or known by the Executive as a consequence of or through his employment with
the Company; (2) not generally known outside the Company; and (3) which
relates to any aspect of the Company or its business, finances, operation
plans, budgets, research, or strategic development. “Confidential Information”
includes, but is not limited to the Company’s trade secrets, proprietary
information, financial documents, long range plans, customer lists, employer
compensation, marketing strategy, data bases, costing data, computer software
developed by the Company, investments made by the Company, and any information
provided to the Company by a third party under restrictions against disclosure
or use by the Company or others.


 


15

















 


5.7          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 and affiliates, 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 the Executive’s employment by the Company, but at no expense to the
Executive, 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.


 


5.8          Return
of Documents, Equipment, Etc.  All writings, records,
and other documents and things comprising, containing, describing, discussing,
explaining, or evidencing any Confidential Information, and all equipment,
components, parts, tools, and the like in Executive’s custody or possession
that have been obtained or prepared in the course of Executive’s employment
with the Company shall be the exclusive property of the Company, shall not be
copied and/or removed from the premises of the Company, except in pursuit of
the business of the Company, and shall be delivered to the Company, without
Executive retaining any copies, upon notification of the termination of Executive’s
employment or at any other time requested by the Company. The Company shall
have the right to retain, access, and inspect all property of Executive of any
kind in the office, work area, and on the premises of the Company upon
termination of Executive’s employment and at any time during employment by the
Company upon termination of Executive’s employment and at any time during
employment by the Company to ensure compliance with the terms of this
Agreement.


 


5.9          Reaffirm
Obligations.  Upon termination of his employment with
the Company, Executive, if requested by Company, shall reaffirm in writing
Executive’s recognition of the importance of maintaining the confidentiality of
the Company’s Confidential Information and proprietary information, and
reaffirm any other obligations set forth in this Agreement.


 


5.10          Prior
Disclosure.  Executive represents and warrants that he
has not used or disclosed any Confidential Information he may have obtained
from Company prior to signing this Agreement, in any way inconsistent with the
provisions of this Agreement.


 


16

















 


5.11          Confidential
Information of Prior Companies.  Executive will not
disclose or use during the period of his employment with the Company any
proprietary or Confidential Information or Copyright Works which Executive may
have acquired because of employment with an employer other than the Company or
acquired from any other third party, whether such information is in Executive’s
memory or embodied in a writing or other physical form


 


5.12          Rights
Upon Breach.  If the Executive breaches, any of the
provisions contained in Section 5
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:


 


(a)           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.


 


(b)           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.


 


5.13          Remedies
For Violation of Non-Competition or Confidentiality Provisions.
Without limiting the right of the Company to pursue all other legal and
equitable rights available to it for violation of any of the obligations and
covenants made by Employee herein, it is agreed that:


 


(a)           the
skills, experience and contacts of Employee are of a special, unique, unusual
and extraordinary character which give them a peculiar value;


 


(b)           because
of the business of the Company, the restrictions agreed to by Employee as to
time and area contained in the Agreement are reasonable; and


 


(c)           the
injury suffered by the Company by a violation of any obligation or covenant in
the Agreement resulting from loss of profits created by (i) the
competitive use of such skills, experience contacts and otherwise and/or (ii) the
use or communication of any information deemed confidential herein will be
difficult to calculate in damages in an action at law and cannot fully
compensate the Company for any violation of any obligation or covenant in the
Agreement, accordingly:


 


(i)            the Company shall
be entitled to injunctive relief to prevent violations thereof and prevent
Employee from rendering any services to any person, firm or entity in breach of
such obligation or covenant and to prevent Employee from divulging any
confidential information; and


 


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(ii)           compliance with the
Agreement is a condition precedent to the Company’s obligation to make payments
of any nature to employee, subject to the other provisions hereof.


 


(d)           employee
waives any objection to the enforceability of the restrictive covenants and
agrees to be estopped from denying the legality and enforceability of these
provisions.


 


5.14          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.


 


5.15          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.


 


5.16          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.


 


5.17          Extension
of Post-Employment Restrictions.  In the event
Executive breaches Section 5
above, the restrictive time periods contained in those provisions will be
extended by the period of time Executive was in violation of such provisions.


 


6.                                                                                                                                      INDEMNIFICATION


 


6.1          General.  The
Company agrees that if the Executive is made a party or is threatened to be
made a party to any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a “Proceeding”), by reason of the fact that the
Executive is or was a trustee, director or officer of the Company, the Company,
or any predecessor to the Company (including any sole proprietorship owned by
the Executive) or any of their affiliates or is or was serving at the request
of the Company, the Company, any predecessor to the Company (including any sole
proprietorship owned by the Executive), or any of their affiliates as a
trustee, director, officer, member, employee or agent of another corporation or
a partnership, joint


 


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venture, limited liability company, trust or other enterprise,
including, without limitation, service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in an official
capacity as a trustee, director, officer, member, employee or agent while
serving as a trustee, director, officer, member, employee or agent, the
Executive shall be indemnified and held harmless by the Company to the fullest
extent authorized by Texas law, as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even if
the Executive has ceased to be an officer, director, trustee or agent, or is no
longer employed by the Company and shall inure to the benefit of his heirs,
executors and administrators.


 


6.2          Expenses.  As
used in this Section, the term “Expenses” shall include, without limitation, damages,
losses, judgments, liabilities, fines, penalties, excise taxes, settlements,
and costs, attorneys’ fees, accountants’ fees, and disbursements and costs of
attachment or similar bonds, investigations, and any expenses of establishing a
right to indemnification under this Agreement.


 


6.3          Enforcement.  If
a claim or request under this Section 6 is not paid by the Company or on its
behalf, within thirty (30) days after a written claim or request has been
received by the Company, the Executive may at any time thereafter bring an
arbitration claim against the Company to recover the unpaid amount of the claim
or request and if successful in whole or in part, the Executive shall be
entitled to be paid also the expenses of prosecuting such suit.  All
obligations for indemnification hereunder shall be subject to, and paid in
accordance with, applicable Texas law.


 


6.4          Partial
Indemnification.  If the Executive is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify the Executive for the portion of such
Expenses to which the Executive is entitled.


 


6.5          Advances
of Expenses.  Expenses incurred by the Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of the Executive that the Company pay such Expenses, but only in the
event that the Executive shall have delivered in writing to the Company (i) an
undertaking to reimburse the Company for Expenses with respect to which the
Executive is not entitled to indemnification and (ii) a statement of his
good faith belief that the standard of conduct necessary for indemnification by
the Company has been met.


 


6.6          Notice
of Claim.  The Executive shall give to the Company
notice of any claim made against him for which indemnification will or could be
sought under this Agreement.  In addition, the Executive shall give the
Company such information and cooperation as it may reasonably require and as
shall be within the Executive’s power and at such times and places as are
convenient for the Executive.


 


6.7          Defense
of Claim.  With respect to any Proceeding as to which
the Executive notifies the Company of the commencement thereof:


 


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(a)           
The Company will be entitled to participate therein at its own expense.


 


(b)           
Except as otherwise provided below, to the extent that it may wish, the Company
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to the Executive, which in the Company’s sole discretion may be
regular counsel to the Company and may be counsel to other officers and
directors of the Company or any subsidiary.  The Executive also shall have
the right to employ his own counsel in such action, suit or proceeding if he
reasonably concludes that failure to do so would involve a conflict of interest
between the Company and the Executive, and under such circumstances the fees
and expenses of such counsel shall be at the expense of the Company.


 


(c)           
The Company shall not be liable to indemnify the Executive under this Agreement
for any amounts paid in settlement of any action or claim effected without its
written consent.  The Company shall not settle any action or claim in any
manner which would impose any penalty that would not be paid directly or
indirectly by the Company or limitation on the Executive without the Executive’s
written consent. Neither the Company nor the Executive will unreasonably
withhold or delay their consent to any proposed settlement.


 


6.8          Non-exclusivity.  The
right to indemnification and the payment of expenses incurred in defending a
Proceeding in advance of its final disposition conferred in this Section 6 shall
not be exclusive of any other right which the Executive may have or hereafter
may acquire under any statute or certificate of incorporation or by-laws of the
Company or any subsidiary, agreement, vote of shareholders or disinterested
directors or trustees or otherwise.


 


7.                                                                                                                                      LEGAL FEES AND
EXPENSES


 


If any contest or dispute shall arise between
the Company and the Executive regarding any provision of this Agreement, the
Company shall reimburse the Executive for all legal fees and expenses
reasonably incurred by the Executive in connection with such contest or
dispute, but only if the Executive prevails to a substantial extent with
respect to the Executive’s claims brought and pursued in connection with such
contest or dispute.  Such reimbursement shall be made as soon as
practicable following the resolution of such contest or dispute (whether or not
appealed) to the extent the Company receives reasonable written evidence of
such fees and expenses. The Company shall advance the Executive reasonable
attorney’s fees during any arbitration proceedings if brought by the Executive,
up to but not to exceed Three Hundred Thousand Dollars ($300,000.00).


 


8.                                                                                                                                      BREACH


 


Executive agrees that any breach of
restrictive covenants above cannot be remedied solely by money damages, and
that in addition to any other remedies Company may have, Company is entitled to
obtain injunctive relief against Executive.  Nothing herein, however,
shall be construed as limiting Company’s right to pursue any other available
remedy at law or in 


 


20

















 


equity, including recovery of damages and termination of this Agreement
and/or any payments that may be due pursuant to this Agreement.


 


9.                                                                                                                                      RIGHT TO ENTER
AGREEMENT


 


Executive represents and covenants to Company
that he has full power and authority to enter into this Agreement and that the
execution of this Agreement will not breach or constitute a default of any
other agreement or contract to which he is a party or by which he is bound.


 


10.                                                                                                                               COMPLIANCE WITH
SECTION 409A


 


10.1        It is the intention of the Company and
the Executive that this Agreement not result in unfavorable tax consequences to
the Executive under Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”).  The
Company and the Executive acknowledge that Section 409A of the Code was
enacted pursuant to the American Jobs Creation Act of 2004, generally effective
with respect to amounts deferred after January 1, 2005, and only limited
guidance has been issued by the Internal Revenue Service with respect to the
application of Code Section 409A to certain arrangements, such as this
Agreement.  The Internal Revenue Service has indicated that it will
provide further guidance regarding interpretation and application of Section 409A
of the Code during 2005. The Company and the Executive acknowledge further that
the full effect of Section 409A of the Code on potential payments pursuant
to this Agreement cannot be fully determined at the time that the Company and
the Executive are entering into this Agreement. The Company and the Executive
agree to work together in good faith in an effort to comply with Section 409A
of the Code including, if necessary, amending the Agreement based on further
guidance issued by the Internal Revenue Service from time to time, provided
that the Company shall not be required to assume any increased economic burden.


 


10.2        Certain
Definitions.  As used in this Agreement, the following
terms have the following meanings unless the context otherwise requires:


 


(a)           
“affiliate”
means any person controlled by or under common control with the Company but
shall not include any stockholder or director of the Company, as such.


 


(b)           
“person”
means any individual, corporation, partnership, limited liability company,
firm, joint company, association, joint-stock company, trust, unincorporated
organization, governmental or regulatory body or other entity.


 


10.3        Delay
in Payments.  Notwithstanding anything to the contrary
in this Agreement, (i) if upon the date of Executive’s termination of
employment with the Company, Executive is a “specified employee” within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended,
or any regulations or Treasury guidance promulgated thereunder (the “Code”) and the
deferral of any amounts otherwise payable under this Agreement as a result of
Executive’s termination of employment is necessary in order to prevent any
accelerated or additional tax to Executive under Code Section 409A, then
the Company will defer the payment 


 


21

















 


of any such amounts hereunder until the date that is six months
following the date of Executive’s termination of employment with the Company,
at which time any such delayed amounts will be paid to Executive in a single
lump sum, with interest from the date otherwise payable at the prime rate as
published in The Wall Street Journal on the date of Executive’s termination of
employment with the Company, and (ii) if any other payments of money or
other benefits due to Executive hereunder could cause the application of an
accelerated or additional tax under Code Section 409A, such payments or
other benefits shall be deferred if deferral will make such payment or other
benefits compliant under Code Section 409A.


 


10.4        Reformation.  If
any provision of this Agreement would cause Executive to occur any additional
tax under Code Section 409A, the parties will in good faith attempt to
reform the provision in a manner that maintains, to the extent possible, the
original intent of the applicable provision without violating the provision of
Code Section 409A.


 


11.                                                                                                                               ENFORCEABILITY


 


The agreements contained in the restrictive
covenant provisions of this Agreement are independent of the other agreements
contained herein.  Accordingly, failure of the Company to comply with any
of its obligations outside of such Sections do not excuse Executive from
complying with the agreements contained herein.


 


12.                                                                                                                               SURVIVABILITY


 


The agreements contained in Sections 5 shall
survive the termination of this Agreement for any reason.


 


13.                                                                                                                               ASSIGNMENT


 


This Agreement cannot be assigned by
Executive. The Company may assign this Agreement only to a successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and assets of the Company provided such
successor expressly agrees in writing reasonably satisfactory to Executive to
assume and perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such succession and
assignment had taken place.  Failure of the Company to obtain such written
agreement prior to the effectiveness of any such succession shall be a material
breach of this Agreement.


 


14.                                                                                                                               BINDING
AGREEMENT


 


Executive understands that his obligations
under this Agreement are binding upon Executive’s heirs, successors, personal
representatives, and legal representatives.


 


15.                                                                                                                               NOTICES


 


All notices pursuant to this Agreement shall
be in writing and sent certified mail, return receipt requested, addressed as
set forth below, or by delivering the same in person to such party, 


 


22

















 


or by transmission by facsimile to the number set forth below. 
Notice deposited in the manner described hereinabove, shall be effective upon
deposit.  Notice given in any other manner shall be effective only if
and when received:


 


If to Executive:


 


Paul A. Bragg


6435 Vanderbilt Street


Houston, Texas 77005


 


If to Company:


 


with a copy (which shall not constitute notice) to:


 


Vantage Drilling Company


777 Post Oak Blvd., Suite 610


Houston, Texas 77056


 


16.                                                                                                                               WAIVER


 


No waiver by either party to this Agreement
of any right to enforce any term or condition of this Agreement, or of any
breach hereof shall be deemed a waiver of such right in the future or of any
other right or remedy available under this Agreement.  The Executive’s or
the Company’s failure to insist upon strict compliance with any provision
hereof or any other provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 3.2
hereof, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.


 


17.                                                                                                                               SEVERABILITY


 


If any provision of this Agreement is
determined to be void invalid, unenforceable, or against public policy, such
provisions shall be deemed severable from the Agreement, and the remaining
provisions of the Agreement will remain unaffected and in full force and
effect.  The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.


 


18.                                                                                                                               ARBITRATION


 


In the event any dispute arises out of
Executive’s employment with or by the Company, or separation/termination
therefrom, whether as an employee, which cannot be resolved by the Parties to
this Agreement, such dispute shall be submitted to final and binding
arbitration.  The arbitration shall be conducted in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association (“AAA”). 
If the Parties cannot agree on an arbitrator, a list of seven (7) arbitrators
will be requested from AAA, and the arbitrator will be selected using alternate
strikes with Executive striking firm. The cost of the 


 


23

















 


arbitration will be borne solely by the Company.  Arbitration of
such disputes is mandatory and in lieu of any and all civil causes of action
and lawsuits either party may have against the other arising out of Executive’s
employment with Company, or separation therefrom.  Such arbitration shall
be held in Houston, Texas.  This provision shall not, however, preclude
the Company from obtaining injunctive relief in any court of competent
jurisdiction to enforce Section 5
of this Agreement.


 


19.                                                                                                                               ENTIRE
AGREEMENT


 


The terms and provisions contained herein
shall constitute the entire agreement between the parties with respect to Executive’s
employment with Company during the time period covered by this Agreement. This
Agreement replaces and supersedes any and all existing Agreements entered into
between Executive and the Company relating generally to the same subject
matter, if any, and shall be binding upon Executive’s heirs, executors,
administrators, or other legal representatives or assigns.


 


20.                                                                                                                               SECTION HEADINGS


 


The section headings in this Employment
Agreement are for convenience of reference only, and they form no part of this Agreement
and shall not affect its interpretation.


 


21.                                                                                                                               MODIFICATION OF
AGREEMENT


 


This Agreement may not be changed or modified
or released or discharged or abandoned or otherwise terminated, in whole or in
part, except by an instrument in writing signed by the Executive and an officer
or other authorized executive of Company.


 


22.                                                                                                                               UNDERSTANDING
OF AGREEMENT


 


Executive represents and warrants that he has
read and understood each and every provision of this Agreement, and Executive
understands that he has the right to obtain advice from legal counsel of
choice, if necessary and desired, in order to interpret any and all provisions
of this Agreement, and that Executive has freely and voluntarily entered into
this Agreement.


 


23.                                                                                                                               GOVERNING LAW


 


This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.


 


24.                                                                                                                               WITHHOLDING


 


All payments hereunder shall be subject to
any required withholding of Federal, state and local taxes pursuant to any
applicable law or regulation.


 


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25.                                                                                                                               JURISDICTION
AND VENUE


 


With respect to any litigation regarding this
Agreement, Executive agrees to venue in the state or federal courts in Harris
County, Texas and agrees to waive and does hereby waive any defenses and/or
arguments based upon improper venue and/or lack of personal jurisdiction. 
By entering into this Agreement, Executive agrees to personal jurisdiction in
the state and federal courts in Harris County, Texas.


 


26.                                                                                                                               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.


 


IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the date first above written.


 


EXECUTIVE


 


	
   

  	
   

  
	
   /s/ Paul A. Bragg

  	
   

  
	
  Paul A.
  Bragg

  	
   

  
	
   

  	
   

  
	
  VANTAGE
  DRILLING COMPANY

  	
   

  
	
   

  	
   

  
	
  By:

  	
   /s/ Douglas G. Smith 

  	
   

  
	
  Name:

  	
  Douglas G.
  Smith

  	
   

  
	
  Title:

  	
   Chief
  Financial Officer

  	
   

  
					



 


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