<PAGE>
                                                                    EXHIBIT 10.3


                           EMPLOYEE MATTERS AGREEMENT

                                      AMONG

                                TRANSOCEAN INC.,

                            TRANSOCEAN HOLDINGS INC.,

                                       AND

                                      TODCO




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                                TABLE OF CONTENTS

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ARTICLE I. DEFINITIONS............................................................................................1
                      AGREEMENT...................................................................................1
                      CODE........................................................................................1
                      DOL.........................................................................................1
                      ERISA.......................................................................................2
                      FMLA........................................................................................2
                      GROUP.......................................................................................2
                      IPO.........................................................................................2
                      IPO CLOSING DATE............................................................................2
                      IRS.........................................................................................2
                      PARTICIPATING COMPANY.......................................................................2
                      PERSON......................................................................................2
                      PLAN........................................................................................2
                      R&B FALCON MANAGEMENT.......................................................................2
                      SEC.........................................................................................2
                      SEPARATION..................................................................................2
                      SEPARATION AGREEMENT........................................................................2
                      SUBSIDIARY..................................................................................3
                      TAX ALLOCATION AGREEMENT....................................................................3
                      TODCO.......................................................................................3
                      TODCO BUSINESS..............................................................................3
                      TODCO CLASS A COMMON STOCK..................................................................3
                      TODCO EMPLOYEE..............................................................................3
                      TODCO GROUP.................................................................................3
                      TODCO VOTING STOCK..........................................................................3
                      TRANSFERRED EMPLOYEE........................................................................3
                      TRANSITION SERVICES AGREEMENT...............................................................3
                      TRANSOCEAN..................................................................................3
                      TRANSOCEAN BUSINESS.........................................................................3
                      TRANSOCEAN GROUP............................................................................4
                      TRANSOCEAN HOLDINGS.........................................................................4

ARTICLE II. GENERAL PRINCIPLES....................................................................................4
         2.01         TODCO PLANS.................................................................................4
         2.02         TRANSOCEAN PLANS............................................................................5
         2.03         SECONDED EMPLOYEES..........................................................................6
         2.04         COAL COMPANY LIABILITIES....................................................................6

ARTICLE III. DEFINED BENEFIT PLANS................................................................................6
         3.01         TRANSOCEAN HOLDINGS' OBLIGATIONS............................................................6
         3.02         TODCO EMPLOYEES' PARTICIPATION..............................................................7
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ARTICLE IV. DEFINED CONTRIBUTION PLANS............................................................................7
         4.01         ACKNOWLEDGEMENT OF PRIOR ACTIONS............................................................7
         4.02         COVENANT TO CONTRIBUTE......................................................................7

ARTICLE V. WELFARE PLANS..........................................................................................8
         5.01         PARTICIPATION IN AND GENERAL ADMINISTRATION OF WELFARE PLANS................................8
         5.02         ADMINISTRATION AND AUDIT OF CERTAIN WELFARE PLANS...........................................9
         5.03         COBRA AND HIPAA............................................................................11
         5.04         LEAVE OF ABSENCE AND FMLA..................................................................11
         5.05         WORKERS' COMPENSATION......................................................................11

ARTICLE VI. EQUITY AND OTHER COMPENSATION........................................................................11
         6.01         [OPTIONS...................................................................................11
         6.02         STOCK PURCHASE PLAN........................................................................12

ARTICLE VII. CERTAIN TRANSITION MATTERS..........................................................................12
         7.01         TRANSITION SERVICES AGREEMENT..............................................................12
         7.02         REQUESTS FOR IRS AND DOL OPINIONS..........................................................12
         7.03         CONSENT OF THIRD PARTIES...................................................................12
         7.04         TAX COOPERATION............................................................................12
         7.05         PLAN RETURNS...............................................................................12

ARTICLE VIII. EMPLOYMENT-RELATED MATTERS.........................................................................13
         8.01         TERMS OF TODCO EMPLOYMENT..................................................................13
         8.02         NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES................................13

ARTICLE IX. GENERAL PROVISIONS...................................................................................13
         9.01         EFFECT IF IPO DOES NOT OCCUR...............................................................13
         9.02         LIMITATION OF LIABILITY....................................................................13
         9.03         RELATIONSHIP OF PARTIES....................................................................14
         9.04         INCORPORATION OF SEPARATION AGREEMENT PROVISIONS...........................................14
         9.05         GOVERNING LAW..............................................................................14
         9.06         SEVERABILITY...............................................................................14
         9.07         AMENDMENT..................................................................................14
         9.08         TERMINATION................................................................................15
         9.09         CONFLICT...................................................................................15
         9.10         COUNTERPARTS...............................................................................15
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                           EMPLOYEE MATTERS AGREEMENT

                  This EMPLOYEE MATTERS AGREEMENT (this "Agreement") is entered
into as of _________________, among Transocean Inc., a company organized under
the laws of the Cayman Islands ("Transocean"), Transocean Holdings Inc., a
Delaware corporation ("Transocean Holdings"), and TODCO (formerly named R&B
Falcon Corporation), a Delaware corporation ("TODCO"). Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to such terms
in Article I hereof.

                                    RECITALS

                  WHEREAS, TODCO is an indirect wholly owned Subsidiary of
Transocean and Transocean Holdings is a direct wholly owned Subsidiary of
Transocean; and

                  WHEREAS, Transocean and TODCO currently contemplate that TODCO
will make an initial public offering ("IPO") of shares of TODCO Class A Common
Stock held by Transocean and its Subsidiaries pursuant to a registration
statement on Form S-1 filed pursuant to the Securities Act of 1933, as amended;
and

                  WHEREAS, in connection with the IPO, the TODCO Group shall
separate from the Transocean Group and each Group will accordingly acquire
certain assets from and assume certain liabilities of the other Group; and

                  WHEREAS, in furtherance of the foregoing, Transocean,
Transocean Holdings and TODCO have agreed to enter into this Agreement to
allocate among them assets, liabilities and responsibilities with respect to
certain employee compensation, benefit plans and programs, and certain
employment matters.

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

                                   ARTICLE I.

                                   DEFINITIONS

                  Wherever used in this Agreement, the following terms shall
have the meanings indicated below, unless a different meaning is plainly
required by the context. The singular shall include the plural, unless the
context indicates otherwise. Headings of sections are used for convenience of
reference only, and in case of conflict, the text of this Agreement, rather than
such headings, shall control:

                  AGREEMENT. "Agreement" means this Employee Matters Agreement
and all amendments made hereto from time to time.

                  CODE. "Code" means the Internal Revenue Code of 1986, as
amended from time to time.

                  DOL. "DOL" means the United States Department of Labor.



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<PAGE>

                  ERISA. "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time.

                  FMLA. "FMLA" means the Family and Medical Leave Act of 1993,
as amended from time to time.

                  GROUP. "Group" shall have the meaning set forth in the
Separation Agreement.

                  IPO. "IPO" has the meaning set forth in the Recitals hereof,
as the same is further described in the Separation Agreement.

                  IPO CLOSING DATE. "IPO Closing Date" means the first date on
which the proceeds of any sale of TODCO Class A Common Stock to the underwriters
in the IPO are received.

                  IRS. "IRS" means the United States Internal Revenue Service.

                  PARTICIPATING COMPANY. "Participating Company" means: (a)
Transocean; (b) any Person (other than an individual) that Transocean has
approved for participation in, has accepted participation in, or which is
participating in, a Plan sponsored by Transocean; or (c) any Person (other than
an individual) that, by the terms of such a Plan, participates in such a Plan
sponsored by Transocean or any employees of which, by the terms of such a Plan,
participate in a Plan.

                  PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization or a governmental
entity or any department, agency or political subdivision thereof.

                  PLAN. "Plan," depending on the context, may mean any plan,
policy, program, payroll practice, arrangement, contract, trust, insurance
policy, or any agreement or funding vehicle providing compensation or benefits
to employees, former employees or directors of Transocean, TODCO or any member
of the Transocean Group or the TODCO Group. "Plan," when immediately preceded by
"Transocean," means a Plan sponsored by Transocean or a member of the Transocean
Group. When immediately preceded by "TODCO," "Plan" means a Plan sponsored by
TODCO or a member of the TODCO Group.

                  R&B FALCON MANAGEMENT. "R&B Falcon Management" means R&B
Falcon Management Services Inc., a Delaware corporation.

                  SEC. "SEC" means the United States Securities and Exchange
Commission.

                  SEPARATION. "Separation" shall have the meaning set forth in
the Separation Agreement.

                  SEPARATION AGREEMENT. "Separation Agreement" means the Master
Separation Agreement among Transocean, Transocean Holdings and TODCO entered
into as of _____________.



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                  SUBSIDIARY. "Subsidiary" shall have the meaning set forth in
the Separation Agreement.

                  TAX ALLOCATION AGREEMENT. "Tax Allocation Agreement" means the
Tax Allocation Agreement, which is attached as an exhibit to the Separation
Agreement.

                  TODCO. "TODCO" means TODCO (formerly known as R&B Falcon
Corporation), a Delaware corporation. In all such instances in which TODCO is
referred to in this Agreement, it shall also be deemed to include a reference to
each member of the TODCO Group, unless it specifically provides otherwise; TODCO
shall be solely responsible to Transocean for ensuring that each member of the
TODCO Group complies with the applicable terms of this Agreement.

                  TODCO BUSINESS. "TODCO Business" shall have the meaning set
forth in the Separation Agreement.

                  TODCO CLASS A COMMON STOCK. "TODCO Class A Common Stock" shall
have the meaning set forth in the Separation Agreement.

                  TODCO EMPLOYEE. "TODCO Employee" means any individual who is
employed in the TODCO Business during the relevant time period.

                  TODCO GROUP. "TODCO Group" shall have the meaning set forth in
the Separation Agreement.

                  TODCO VOTING STOCK. "TODCO Voting Stock" shall have the
meaning set forth in the Separation Agreement.

                  TRANSFERRED EMPLOYEE. "Transferred Employee" means any
individual who was previously employed in the Transocean Business and then was
transferred to work in the TODCO Business on or prior to the IPO Closing Date
and remained employed in the TODCO Business as of the IPO Closing Date or did
not return to work in the Transocean Business prior to the IPO Closing Date.

                  TRANSITION SERVICES AGREEMENT. "Transition Services Agreement"
means the Transition Services Agreement, which is attached as an exhibit to the
Separation Agreement.

                  TRANSOCEAN. "Transocean" means Transocean Inc., a company
organized under the laws of the Cayman Islands. In all such instances in which
"Transocean" is referred to in this Agreement, it shall also be deemed to
include a reference to each member of the Transocean Group, unless it
specifically provides otherwise.

                  TRANSOCEAN BUSINESS. "Transocean Business" shall have the
meaning set forth in the Separation Agreement.



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<PAGE>

                  TRANSOCEAN GROUP. "Transocean Group" shall have the meaning
set forth in the Separation Agreement.

                  TRANSOCEAN HOLDINGS. "Transocean Holdings" means Transocean
Holdings Inc., a Delaware corporation.

                                   ARTICLE II.

                               GENERAL PRINCIPLES

         2.01 TODCO PLANS.

                  (a) Non-Duplication of Benefits. With respect to the Plans
         that TODCO establishes or maintains on or after the IPO Closing Date,
         the separate TODCO Plans shall be, with respect to employees of the
         TODCO Group, in all respects the successors in interest to, and shall
         not provide benefits that duplicate benefits provided by, the
         corresponding Transocean Plans. Transocean and TODCO shall mutually
         agree, if necessary, on methods and procedures, including amending the
         respective Plan documents, to prevent employees of the TODCO Group from
         receiving duplicate benefits from the Transocean Plans and the TODCO
         Plans.

                  (b) Service Credit. Except as specified otherwise in this
         Agreement or as required by applicable law, with respect to TODCO
         Employees, each TODCO Plan in existence on the IPO Closing Date shall
         provide that all service, all compensation and all other
         benefit-affecting determinations that, as of the IPO Closing Date, were
         recognized under the corresponding Transocean Plan shall, as of the IPO
         Closing Date, receive full recognition and credit and be taken into
         account under such TODCO Plan to the same extent as if such items
         occurred under such TODCO Plan, except to the extent that duplication
         of benefits would result. The service crediting provisions shall be
         subject to any respectively applicable "service bridging," "break in
         service," "employment date" or "eligibility date" rules under the TODCO
         Plans and the Transocean Plans.

                  (c) Beneficiary Designations. Subject to Section 7.03 of this
         Agreement, all beneficiary designations made by the TODCO Employees for
         the Transocean Plans shall be transferred to and be in full force and
         effect under the corresponding TODCO Plans until such time, if ever,
         that any such beneficiary designation is replaced or revoked by the
         TODCO Employee who made the beneficiary designation.

                  (d) TODCO Under No Obligation to Maintain Plans. Except as
         specified otherwise in this Agreement, nothing in this Agreement shall
         preclude TODCO, at any time from amending, merging, modifying,
         terminating, eliminating, reducing, or otherwise altering in any
         respect any TODCO Plan, any benefit under any TODCO Plan or any trust,
         insurance policy or funding vehicle related to any TODCO Plan (to the
         extent permitted by law).



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<PAGE>

         2.02 TRANSOCEAN PLANS.

                  (a) TODCO's Participation in Transocean Plans. After the IPO
         Closing Date, TODCO shall continue to be a Participating Company in the
         Transocean U.S. Life Insurance Plan, the Transocean U.S. Long Term
         Disability Plan and the Transocean Accidental Death & Dismemberment
         Plan for the period of time specified in this Agreement, subject to the
         terms and conditions provided in said Plans and in Articles III and IV
         of this Agreement. Except as otherwise provided in this Section 2.02(a)
         or unless the prior written consent of Transocean is obtained, TODCO
         shall not participate in any Transocean Plans.

                  (b) Transocean's General Obligations as Plan Sponsor.
         Transocean or Transocean Holdings, whichever is applicable, shall
         continue to administer, or cause to be administered, in accordance with
         their terms and applicable law, the Transocean Plans specifically
         identified in Section 2.02(a), and shall have the sole and absolute
         discretion and authority to interpret said Transocean Plans, as set
         forth therein, subject to the specific arrangements provided in
         Articles III, IV and V of this Agreement. Transocean shall not
         discriminate against TODCO Employees in favor of employees employed by
         the Transocean Group with respect to the administration and/or
         distribution of benefits under said Transocean Plans.

                  (c) TODCO's General Obligations as Participating Company.
         TODCO shall perform with respect to its participation in the Transocean
         Plans identified in Section 2.02(a) above, the duties of a
         Participating Company as set forth in each such Plan or any procedures
         adopted pursuant thereto, including (without limitation): (i) assisting
         in the administration of claims, to the extent requested by the claims
         administrator of the applicable Transocean Plan; (ii) cooperating fully
         with Transocean Plan auditors, benefit personnel and benefit vendors;
         (iii) preserving the confidentiality of all financial arrangements
         Transocean has or may have with any vendors, claims administrators,
         trustees or any other entity or individual with whom Transocean has
         entered into an agreement relating to the Transocean Plans; and (iv)
         preserving the confidentiality of participant information (including,
         without limitation, personal health information) to the extent not
         specified otherwise in this Agreement. In addition, TODCO shall
         provide, or cause to be provided, all participant information that is
         necessary or appropriate for the efficient and accurate administration
         of each Transocean Plans identified in Section 2.02(a) during the
         respective periods applicable to such Plans. Transocean and its
         respective authorized agents shall, subject to applicable laws of
         confidentiality and data protection, be given reasonable and timely
         access to, and may make copies of, all information relating to the
         subjects of this Agreement in the custody of the other party or its
         agents, to the extent necessary or appropriate for the administration
         of said Plans.

                  (d) Reporting and Disclosing Communications to Participants.
         While TODCO is a Participating Company in the Transocean Plans,
         Transocean or Transocean Holdings, whichever is applicable, shall take,
         or cause to be taken, all actions necessary or appropriate to
         facilitate the distribution of all Transocean Plan-related
         communications and materials to participating TODCO Employees and their
         beneficiaries, including



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         (without limitation) summary plan descriptions and related summaries of
         material modification(s), summary annual reports, investment
         information, prospectuses, notices and enrollment material for the
         Transocean Plans. TODCO shall provide all information needed by
         Transocean to facilitate such Transocean Plan-related communications.
         TODCO shall take, or cause to be taken, all actions necessary or
         appropriate to facilitate the distribution of all TODCO Plan-related
         communications and materials to participating TODCO Employees and their
         beneficiaries. TODCO shall assist, and TODCO shall cause each other
         applicable member of the TODCO Group to assist, Transocean in complying
         with all reporting and disclosure requirements of ERISA, including the
         preparation of Form Series 5500 annual reports, for the Transocean
         Plans, where applicable.

         2.03 SECONDED EMPLOYEES. Certain employees of Transocean Holdings are
seconded to work in the TODCO Business ("Seconded Employees"). Effective as of
December 31, 2002, the Seconded Employees ceased to participate in any
Transocean Plans. Effective as of January 1, 2003, such employees commenced to
participate in and receive coverage under the TODCO Plans, subject to the
eligibility provisions of each such Plan. TODCO hereby acknowledges that TODCO
shall indemnify and hold Transocean and the Transocean Group and their
directors, officers and employees harmless from and against all liability, loss,
expense, cost or claims of whatsoever nature, arising out of any acts or
omissions of the Seconded Employees who are, at the time of such action or
omission, acting in the course and scope of performing services for the benefit
of TODCO, except to the extent that such liability arises under the Transocean
Plans or is otherwise attributable to services performed for Transocean or any
member of the Transocean Group.

         2.04 COAL COMPANY LIABILITIES. Transocean shall continue to administer
the group life and health insurance for retired employees who are eligible for
such coverage as a result of their employment with Reading & Bates Coal Co. or
any of its subsidiaries that conducted coal production activities (each referred
to as a "Coal Company"), and be responsible for the costs of such liabilities
and the related premium payments for such retired employees in accordance with
past practices and the terms and conditions of the applicable plan established,
maintained or sponsored by a Coal Company. In addition, Transocean shall
continue to administer the occupational injury and disease claims, if any, for
employees who were employed by a Coal Company and be responsible for the costs
of such liabilities. TODCO shall provide Transocean with any assistance, data or
information that is reasonably necessary or appropriate for the efficient and
accurate administration of such retiree life and medical coverage and
occupational injury and disease claims.

                                  ARTICLE III.

                              DEFINED BENEFIT PLANS

         3.01 TRANSOCEAN HOLDINGS' OBLIGATIONS. Transocean Holdings hereby
affirmatively covenants that, to the extent permitted by law, the Transocean
Holdings U.S. Pension Plan shall provide that, effective as of the date on which
TODCO is no longer a member of the "controlled group" of corporations of
Transocean (as defined in section 414(b) of the Code), a participant in said
Plan who is employed in the TODCO Business shall be deemed to



                                      -6-
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have terminated his or her employment under said Plan and, if otherwise eligible
under said Plan, shall be eligible to receive a distribution of benefits in
accordance with the terms and conditions of Section 4.18 of said Plan. In
addition, Transocean Holdings hereby affirmatively covenants that the Transocean
Holdings U.S. Pension Plan shall provide that, effective as of the date on which
TODCO is no longer a member of the "controlled group" of corporations of
Transocean (as defined in section 414(b) of the Code), affected employees who
participate in the Transocean Holdings U.S. Pension Plan shall be entitled to
defer the receipt of their accrued benefits under said Plan, to roll over their
accrued benefit amount under said Plan to another eligible retirement plan, or
to receive a distribution under said Plan, all subject to the terms and
conditions of said Plan and to any taxation and early withdrawal penalties.

         3.02 TODCO EMPLOYEES' PARTICIPATION. Effective as of July 1, 1999, the
Transocean Holdings U.S. Pension Plan was frozen and TODCO Employees were no
longer eligible to first become an active participant in said Plan. In addition,
effective as of such date, TODCO Employees who have accrued benefits under said
Plan were no longer eligible to actively participate in said Plan and receive
credit for benefit service or average monthly compensation for any purpose under
said Plan. A Transferred Employee who participates in the Transocean Holdings
U.S. Pension Plan shall not be deemed to be a deferred vested participant under
the Transocean Holdings U.S. Pension Plan, provided that such employee was
eligible to retire on January 1, 2003, and commences his or her benefits under
such Plan when he or she terminates employment with TODCO.

                                   ARTICLE IV.

                           DEFINED CONTRIBUTION PLANS

         4.01 ACKNOWLEDGEMENT OF PRIOR ACTIONS. Prior to November 1, 2002,
Transferred Employees on the U.S. payroll and employees who were employed in the
TODCO Business were eligible to participate in the Transocean U.S. Savings Plan.
Effective as of November 1, 2002, employees who were employed in the TODCO
Business were no longer eligible to participate in the Transocean U.S. Savings
Plan, and said Plan was amended to eliminate participation by such employees as
of November 1, 2002. Effective as of November 1, 2002, employees who were
employed in the TODCO Business resumed participation in the TODCO Savings Plan
(which previously had been frozen). On or about January 1, 2003, liabilities for
the account balances under the Transocean U.S. Savings Plan for existing
employees who were employed in the TODCO Business, and assets associated with
those liabilities, were transferred to the TODCO Savings Plan, and liabilities
for the account balances under the TODCO Savings Plan for existing employees who
were employed in the Transocean Business, and assets associated with those
liabilities, were transferred to the Transocean U.S. Savings Plan.

         4.02 COVENANT TO CONTRIBUTE. TODCO hereby affirmatively covenants to
make an additional annual employer contribution to the TODCO Savings Plan on
behalf of those participants who are employed in the TODCO Business in the
amount of 1 1/2% of each such employee's base pay. TODCO further acknowledges
that such additional annual employer contribution shall be made during the
period commencing on November 1, 2002, and ending on the date on which TODCO is
no longer a member of the "controlled group" of corporations of



                                      -7-
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Transocean (as defined in section 414(b) of the Code) or such other date that
TODCO and Transocean mutually agree otherwise.

                                   ARTICLE V.

                                  WELFARE PLANS

         5.01 PARTICIPATION IN AND GENERAL ADMINISTRATION OF WELFARE PLANS.

                  (a) Medical and Dental Plan. Effective as of August 1, 2002,
         Transocean transferred sponsorship of the Transocean Shallow-Water
         Group Medical and Dental Plan to TODCO, and said Plan has been renamed
         the TODCO Medical and Dental Benefits Plan.

                  (b) Retiree Medical.

                           (i) Effective as of August 1, 2002, Transocean
                  Holdings assumed the obligations, liabilities and costs of
                  retiree medical coverage for employees who retired from TODCO
                  and who were participants in the Transocean Holdings Medical
                  and Dental Benefits Plan as of such date. Transocean Holdings
                  shall continue to administer, or cause to be administered, in
                  accordance with their terms and applicable law, said Plan, and
                  shall have sole and absolute discretion and authority to
                  interpret said Plan or amend or terminate said Plan, as set
                  forth therein. Except as otherwise expressly provided above,
                  no other employee of any member of the TODCO Group shall be
                  entitled to benefits under the Transocean Holdings Medical and
                  Dental Benefits Plan. TODCO shall have no obligation to
                  establish, maintain or sponsor a medical benefits plan for
                  retired employees.

                           (ii) Transferred Employees who were eligible to
                  commence retiree medical coverage under the Transocean
                  Holdings Medical and Dental Benefits Plan as of January 1,
                  2003 shall remain eligible to receive retiree medical coverage
                  under said Plan, even after they transfer to work in the TODCO
                  Business; provided, however, that such coverage shall be
                  received by such Transferred Employees only to the extent that
                  other employees of the Transocean Group on the U.S. payroll
                  who are similarly situated as to age, length of service and
                  retiree medical commencement date are covered under said Plan
                  on similar terms. Such Transferred Employees shall be required
                  to contact Transocean's benefits department no later than 60
                  days after the date of their retirement in order to commence
                  the retiree medical coverage available to them upon their
                  retirement from the TODCO Business. Notwithstanding the
                  foregoing, such Transferred Employees ceased to accrue
                  additional service under the Transocean Holdings Medical and
                  Dental Benefits Plan as of December 31, 2002.

                  (c) Life Insurance and Long Term Disability. Transocean
         sponsors the Transocean U.S. Life Insurance Plan and the Transocean
         U.S. Long Term Disability Plan. In connection with said Plans,
         Transocean has a guaranteed rate under the group



                                      -8-
<PAGE>

         life insurance policy and the long term disability insurance policy
         with Hartford Life & Accident Insurance Company, a Delaware corporation
         ("Hartford"), until January 1, 2005. Transocean hereby affirmatively
         covenants to use reasonable efforts to retain such policies until the
         first to occur of January 1, 2005 or the date on which Transocean no
         longer owns shares representing at least a majority of the voting power
         of all of the outstanding shares of TODCO Voting Stock. In addition,
         Transocean affirmatively covenants to use reasonable efforts to obtain
         a separate premium reporting structure from Hartford for such policies,
         to be effective as of the IPO Closing Date, provided that such
         continued coverage does not result in an increased premium rate under
         the relevant policy. If Transocean is unable to obtain a separate
         premium reporting structure for a policy, Transocean shall allocate the
         premium owed to Hartford and attributable to coverage for TODCO
         Employees based on past practices.

                  (d) AD&D. Transocean currently sponsors the Transocean
         Accidental Death & Dismemberment Plan and has an Accidental Death and
         Dismemberment ("AD&D") contract with Cigna Life insurance Company of
         North America, a Pennsylvania corporation ("Cigna"). Transocean has a
         guaranteed rate under the AD&D contract with Cigna until December 31,
         2003. Unless Transocean and TODCO mutually agree otherwise, Transocean
         affirmatively covenants to use reasonable efforts to retain coverage
         for TODCO Employees under the existing AD&D contract with Cigna,
         provided that such continued coverage does not result in an increased
         premium rate. Transocean shall retain said coverage for TODCO Employees
         until the first to occur of January 1, 2004 or the date on which
         Transocean no longer owns shares representing at least a majority of
         the voting power of all outstanding shares of TODCO Voting Stock.

                  (e) Short Term Disability. TODCO hereby acknowledges that
         TODCO has been and shall continue to be responsible for and administer
         all liabilities (if any) for TODCO Employees who are on nonoccupational
         medical leaves of absence.

                  (f) Flexible Benefits Plan. Effective as of August 1, 2002,
         TODCO Employees ceased to participate in the Transocean Flexible
         Benefits Plan with Health Care Reimbursement, and their accounts under
         said Plan were transferred to the TODCO Flexible Benefits Plan as of
         the date. TODCO hereby acknowledges that TODCO shall be responsible for
         the administration of the TODCO Flexible Benefits Plan. Until April 30,
         2003, Transocean shall continue to reimburse TODCO Employees for claims
         submitted under the Transocean Flexible Benefits Plan with Health Care
         Reimbursement during the 2002 Plan year, subject to the terms and
         conditions of the Plan.

         5.02 ADMINISTRATION AND AUDIT OF CERTAIN WELFARE PLANS.

                  (a) Medical and Dental Plan. Transocean shall continue to
         maintain the administration of the TODCO Medical and Dental Benefits
         Plan until December 31, 2003 Transocean agrees that the TODCO Medical
         and Dental Benefits Plan shall continue to be administered by Benefit
         Planners Inc. ("BPI"), a third-party claims administrator, in
         accordance with that certain Administrative Services Agreement, dated
         effective August 1, 1999 (the "Administrative Agreement"), unless
         Transocean gives written notice to TODCO of a change in administrators.
         The administrative costs of said Plan



                                      -9-
<PAGE>

         that are attributable to TODCO Employees shall be assumed and charged
         to TODCO in a manner that is consistent with past practice, and TODCO
         hereby affirmatively covenants to pay such costs to Transocean. In
         addition, TODCO hereby affirmatively covenants to provide Transocean
         with the participant data necessary to administer any claims or
         determine amounts owed under said Plan and the payment for
         administrative costs attributable to TODCO Employees under the
         Administrative Agreement no later than the 5th day of each month. TODCO
         shall provide Transocean any other all participant information that is
         reasonably necessary or appropriate for the efficient and accurate
         administration of said Plan. Notwithstanding the foregoing, the payment
         or funding of any claim of a TODCO Employee under the TODCO Medical and
         Dental Benefits Plan shall be the sole responsibility of TODCO.

                  (b) Life Insurance, Long Term Disability and AD&D. Transocean
         shall continue to calculate the premiums attributable to TODCO
         Employees under the Transocean U.S. Life Insurance Plan, the Transocean
         U.S. Long Term Disability Plan and the Transocean Accidental Death &
         Dismemberment Plan until July 1, 2003 and, during such time, TODCO
         shall provide Transocean with the premium payments owed for TODCO
         Employees no later than the 10th day of each month or, if later, three
         business days after the date on which TODCO receives notice of the
         amount of the premiums owed. After July 1, 2003, TODCO shall provide
         Transocean with the premium report and/or the data used for premium
         calculations for TODCO Employees and the premium payments owed for such
         TODCO Employees no later than the 10th day of each month.
         Notwithstanding the foregoing, if the rates guaranteed under the
         policies with Hartford cease to apply for any reason prior to December
         31, 2004, TODCO retains the right to cease to be a Participating
         Company in the Transocean U.S. Life Insurance Plan and the Transocean
         U.S. Long Term Disability Plan, whichever is applicable. In addition,
         notwithstanding the foregoing, if the rate guaranteed under the AD&D
         contract ceases to apply for any reason prior to December 31, 2003,
         TODCO retains the right to cease to be a Participating Company in the
         Transocean Accidental Death & Dismemberment Plan.

                  (c) Audits. Transocean shall have the right to conduct an
         audit of TODCO's participant information relating to the TODCO Medical
         and Dental Benefits Plan coverage through the period ending December
         31, 2003, and if TODCO fails to cooperate with such audit, Transocean
         retains the right to cease administration of that Plan under the
         Administrative Agreement. Transocean shall also have the right to
         conduct an audit of the premium report and the data used for premium
         calculations for TODCO Employees under the Transocean U.S. Life
         Insurance Plan, the Transocean U.S. Long Term Disability Plan and the
         Transocean Accidental Death & Dismemberment Plan at any time, and if
         TODCO fails to cooperate with such audit, Transocean retains the right
         to cause TODCO to cease to be a Participating Company in said Plans.
         TODCO shall continue to make available in connection with the audit all
         documents and other information that Transocean reasonably requires.
         Transocean shall determine, in its sole discretion, the performance
         standards, audit methodology, auditing policy and quality measures and
         reporting requirements.



                                      -10-
<PAGE>

         5.03 COBRA AND HIPAA. As provided in Section 5.02(a) of this Agreement,
until December 31, 2003, BPI shall continue to administer the TODCO Medical and
Dental Benefits Plan and, in turn, the compliance with the health care
continuation coverage requirements for "group health plans" under Title X of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
and the portability requirements under Health Insurance Portability and
Accountability Act of 1996 ("HIPAA"), with respect to TODCO Employees and their
qualified beneficiaries (as such term is defined under COBRA) whose coverage
under said Plan terminates, subject to TODCO's cooperation with participant data
request and payment of administrative costs attributable to TODCO Employees and
the terms and conditions of the Administrative Agreement. TODCO hereby
acknowledges that TODCO shall be solely responsible for administering compliance
with the health care continuation coverage requirements for "group health plans"
under Title X of COBRA, and the portability requirements under HIPAA, (a) on and
after January 1, 2004, with respect to TODCO Employees and their qualified
beneficiaries (as such term is defined under COBRA) whose coverage under the
TODCO Medical and Dental Benefits Plan terminates, and (b) with respect to TODCO
Employees and their qualified beneficiaries (as such term is defined under
COBRA) whose coverage under any other Transocean Plans and TODCO Plans
terminates, regardless of whether such termination takes place prior to, on or
subsequent to the IPO Closing Date. Notwithstanding the foregoing, the payment
or funding of any claim of a TODCO Employee under COBRA or HIPAA shall be the
sole responsibility of TODCO.

         5.04 LEAVE OF ABSENCE AND FMLA. TODCO hereby acknowledges that TODCO
shall be responsible for administering leaves of absence and complying with FMLA
with respect to TODCO Employees. Transocean shall have the right to conduct an
audit of TODCO's compliance with FMLA at any time prior to the date on which
TODCO is no longer a member of the "controlled group" of corporations of
Transocean (as defined in section 414(b) of the Code). TODCO shall continue to
make available in connection with the audit all documents and other information
that Transocean reasonably requires. Transocean shall determine, in its sole
discretion, the performance standards, audit methodology, auditing policy and
quality measures and reporting requirements.

         5.05 WORKERS' COMPENSATION. TODCO hereby acknowledges that TODCO has
been and shall continue to be responsible for the administration, costs and
funding of workers' compensation claims for TODCO Employees.

                                   ARTICLE VI.

                          EQUITY AND OTHER COMPENSATION

         6.01 OPTIONS. Certain TODCO Employees have been granted options under
the Long-Term Incentive Plan of Transocean Inc. Transocean agrees that service
with TODCO shall be considered to be service with a "subsidiary" as defined in
the Long-Term Incentive Plan for so long as Transocean continues to own shares
representing at least a majority of the voting power of all of the outstanding
shares of TODCO Voting Stock. If the TODCO Employee is employed by TODCO as of
the date on which Transocean ceases to own shares representing at least a
majority of the voting power of all of the outstanding shares of TODCO Voting
Stock, then (i) such TODCO Employee shall no longer be considered employed by
Transocean or one



                                      -11-
<PAGE>

of its subsidiaries under said Plan and, in turn, shall be considered terminated
for purposes of determining the TODCO Employee's rights with respect to such
option and (ii) such termination shall be considered a termination for the
convenience of Transocean under said Plan.

         6.02 STOCK PURCHASE PLAN. Effective as of January 1, 2003, R&B Falcon
Management ceased to be a Participating Company in the Transocean Employee Stock
Purchase Plan, and TODCO Employees were no longer eligible to participate in
said Plan. As soon as administratively feasible after such date, TODCO Employees
shall receive the amounts credited to their accounts under said Plan and a
certificate for the number of shares of stock held in their accounts in
accordance with Section 11 of said Plan.

                                  ARTICLE VII.

                           CERTAIN TRANSITION MATTERS

         7.01 TRANSITION SERVICES AGREEMENT. On or about the date hereof,
Transocean Holdings and TODCO shall enter into the Transition Services Agreement
covering the provisions of various services to be provided by Transocean
Holdings and its affiliates to TODCO. The provisions of this Agreement shall be
subject to the provisions of such Transition Services Agreement and to the
extent that any provision in this Agreement is inconsistent with a provision in
the Transition Services Agreement the provision in the Transition Services
Agreement shall control.

         7.02 REQUESTS FOR IRS AND DOL OPINIONS. Transocean, Transocean Holdings
and TODCO shall make such applications to regulatory agencies, including the IRS
and the DOL, as may be necessary or appropriate. TODCO and Transocean shall
cooperate fully with one another on any issue relating to the transactions
contemplated by this Agreement for which Transocean and/or TODCO elects to seek
a determination letter or private letter ruling from the IRS or an advisory
opinion from the DOL.

         7.03 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor) and such consent
is withheld, Transocean, Transocean Holdings and TODCO shall use their
commercially reasonable best efforts to implement the applicable provisions of
this Agreement. If any provision of this Agreement cannot be implemented due to
the failure of such third party to consent, Transocean, Transocean Holdings and
TODCO shall negotiate in good faith to implement the provision in a mutually
satisfactory manner.

         7.04 TAX COOPERATION. In connection with the interpretation and
administration of this Agreement, Transocean, Transocean Holdings and TODCO
shall take into account the agreements and policies established pursuant to the
Separation Agreement and the Tax Allocation Agreement.

         7.05 PLAN RETURNS. Plan Returns shall be filed or caused to be filed by
Transocean, Transocean Holdings or TODCO, as the case may be, in accordance with
the principles established in the Tax Allocation Agreement. For purposes of this
Section 7.05, "Plan Returns" means any return, report, certificate, form or
similar statement or document required to



                                      -12-
<PAGE>

be filed with a government agency with respect to an employee benefit plan
governed by the ERISA, or a program governed by section 6039D of the Code.

                                  ARTICLE VIII.

                           EMPLOYMENT-RELATED MATTERS

         8.01 TERMS OF TODCO EMPLOYMENT. Employees of the TODCO Group may be
required to execute a new agreement regarding confidential information and
proprietary developments in a form approved by TODCO. In addition, nothing in
this Agreement, the Separation Agreement, the Transition Services Agreement or
the Tax Allocation Agreement should be construed to change the at-will status of
any of the employees of any member of the Transocean Group or the TODCO Group.

         8.02 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
provision of this Agreement shall be construed to create any right, or
accelerate entitlement, to any compensation or benefit whatsoever on the part of
any TODCO Employee or other future, present or former employee of Transocean,
TODCO, the Transocean Group or the TODCO Group under any Transocean Plan or
TODCO Plan or otherwise. Without limiting the generality of the foregoing: (a)
except as otherwise provided in this Agreement or applicable provisions of the
Plans, neither the IPO, the Separation nor the termination of the Participating
Company status of TODCO or any member of the TODCO Group shall cause any
employee to be deemed to have incurred a termination of employment; and (b)
except as otherwise provided in this Agreement, no transfer of employment
between the Transocean Group and the TODCO Group before the IPO Closing Date
shall be deemed a termination of employment for any purpose hereunder.

                                   ARTICLE IX.

                               GENERAL PROVISIONS

         9.01 EFFECT IF IPO DOES NOT OCCUR. Subject to Section 9.08, if the IPO
does not occur, then all actions and events that are, under this Agreement, to
be taken or occur effective as of the IPO Closing Date, or otherwise in
connection with the IPO, shall not be taken or occur except to the extent
specifically agreed by the parties.

         9.02 LIMITATION OF LIABILITY. TO THE EXTENT THAT TRANSOCEAN OR ANY
MEMBER OF THE TRANSOCEAN GROUP PROVIDES SERVICES UNDER THIS AGREEMENT TO TODCO,
AND SUCH SERVICES ARE NOT OTHERWISE ADDRESSED IN THE TRANSITION SERVICES
AGREEMENT, SUCH SERVICES SHALL BE PERFORMED WITH THE SAME GENERAL DEGREE OF CARE
AS WHEN PERFORMED WITHIN THE TRANSOCEAN ORGANIZATION. TODCO HEREBY EXPRESSLY
WAIVES ANY RIGHT TODCO MAY OTHERWISE HAVE FOR ANY LOSSES, TO ENFORCE SPECIFIC
PERFORMANCE OR TO PURSUE ANY OTHER REMEDY AVAILABLE IN CONTRACT, AT LAW, OR IN
EQUITY IN THE EVENT OF ANY NON-PERFORMANCE, INADEQUATE PERFORMANCE, FAULTY
PERFORMANCE OR OTHER FAILURE OR BREACH BY TRANSOCEAN OR ANY MEMBER OF THE



                                      -13-
<PAGE>

TRANSOCEAN GROUP UNDER OR RELATING TO THIS AGREEMENT, NOTWITHSTANDING THE
NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT OR ACTIVE OR PASSIVE) OR GROSS
NEGLIGENCE OF TRANSOCEAN OR ANY MEMBER OF THE TRANSOCEAN GROUP OR ANY OTHER
PERSON OR ENTITY INVOLVED IN THE PROVISION OF SERVICES AND WHETHER DAMAGES ARE
ASSERTED IN CONTRACT OR TORT, UNDER FEDERAL, STATE OR FOREIGN LAWS OR OTHER
STATUTE OR OTHERWISE.

         9.03 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be deemed
or construed by the parties or any third party as creating a fiduciary
relationship, a relationship of principal and agent, partnership or joint
venture between the parties, the understanding and agreement being that no
provision contained herein, and no act of the parties, shall be deemed to create
any relationship between the parties other than the relationship set forth
herein. This Agreement shall be binding upon and inure solely to the benefit of
and be enforceable by each party and its respective successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to or shall
confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

         9.04 INCORPORATION OF SEPARATION AGREEMENT PROVISIONS. If a dispute,
claim or controversy results from or arises out of or in connection with this
Agreement, the parties agree to use the procedures set forth in Article VI of
the Separation Agreement in lieu of other available remedies, to resolve same.
The provisions of Sections 8.1 (Limitation of Liability) and 8.5 (Notices) of
the Separation Agreement are hereby incorporated herein by reference, and unless
otherwise expressly specified herein, such provisions shall apply as if fully
set forth herein (references in this Section 9.04 to an "Article" or a "Section"
shall mean Articles or Sections of the Separation Agreement, and, except as
expressly set forth herein, references in the material incorporated herein by
reference shall be references to the Separation Agreement).

         9.05 GOVERNING LAW. To the extent not preempted by applicable federal
law, this Agreement shall be governed by, construed and interpreted in
accordance with the laws of the State of Texas, irrespective of the choice of
law principles of the State of Texas, as to all matters, including matters of
validity, construction, effect, performance and remedies.

         9.06 SEVERABILITY. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner materially adverse to either party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible and in an
acceptable manner to the end that transactions contemplated hereby are fulfilled
to the fullest possible extent.

         9.07 AMENDMENT. Transocean, Transocean Holdings and TODCO may mutually
agree to amend the provisions of this Agreement at any time or times, either
prospectively or retroactively, to such extent and in such manner as the Boards
mutually deem advisable. Each



                                      -14-
<PAGE>

Board may delegate its amendment power, in whole or in part, to one or more
Persons or committees as it deems advisable.

         9.08 TERMINATION. This Agreement may be terminated at any time prior to
the IPO Closing Date by Transocean in its sole discretion (without the approval
of TODCO). This Agreement may be terminated at any time after the IPO Closing
Date by mutual consent of Transocean, Transocean Holdings and TODCO. In the
event of termination pursuant to this Section, no party shall have any liability
of any kind under this Agreement to the other party.

         9.09 CONFLICT. In the event of any conflict between the provisions of
this Agreement and the Separation Agreement or any Plan, the provisions of this
Agreement shall control. In the event of any conflict between the provisions of
this Agreement and the Transition Services Agreement, the provisions of the
Transition Services Agreement shall control.

         9.10 COUNTERPARTS. This Agreement may be executed in two or more
counterparts each of which shall be deemed to be an original, but all of which
together shall constitute but one and the same Agreement.





                                      -15-
<PAGE>

                  IN WITNESS WHEREOF, each of the parties has caused this
Employee Matters Agreement to be executed on its behalf by its officers
thereunto duly authorized on the day and year first above written.

                                    TRANSOCEAN INC.


                                    By:
                                       -----------------------------------------
                                    Name:
                                    Title:


                                    TRANSOCEAN HOLDINGS INC.


                                    By:
                                       -----------------------------------------
                                    Name:
                                    Title:


                                    TODCO


                                    By:
                                       -----------------------------------------
                                    Name:
                                    Title:



                                      -16-