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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") by and between Grant
Prideco, Inc., a Delaware corporation (the "Company"), and Xxxxxx X. Xxxx (the
"Executive"), dated April 14, 2000.
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has
previously determined that it is in the best interests of the Company and its
stockholders to retain the Executive and to induce the employment of the
Executive for the long term benefit of the Company;
WHEREAS, the Board does not contemplate the termination of the
Executive during the term hereof and the Board and the Executive expect that the
Executive will be retained for at least the three year period contemplated
herein; and
WHEREAS, to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment.
(a) The Company hereby agrees that the Company or an
affiliated company will continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement, during the Employment Period (as
defined below).
(b) The "Employment Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Employment Period shall be automatically
extended so as to terminate three years after such Renewal Date, unless at least
60 days prior to the Renewal Date the Company shall give notice to the Executive
that the Contract Period shall not be so extended.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting requirements,
authority, duties and responsibilities) shall be Vice President and
Interim General Counsel of the Company and he shall report to the
Chairman of the Board of the Company and (B) the Executive's services
shall be performed at the principal executive offices of Xxxxxxxxxxx
International, Inc. in Houston, Texas or such other locations as do not
unreasonably interfere with the Executive's ability to perform services
hereunder.
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(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled,
the Executive agrees to assist the Company on a part-time basis from
time to time during normal business hours as the Company may reasonably
require in the development and implementation of the Company's
strategic alternatives; provided, however, that the services of the
Executive hereunder shall not materially interfere with the principal
employment of the Executive or, in any case, require the Executive to
devote more than 20% of his business time to the business of the
Company. The Executive will use his reasonable efforts to perform
faithfully and efficiently such responsibilities. During the Employment
Period it shall not be a violation of this Agreement for the Executive
to (A) continue his employment with Xxxxxxxxxxx International, Inc. and
its affiliates or other entities by which the Executive is employed,
(B) serve on corporate, civic or charitable boards or committees, (C)
deliver lectures, fulfill speaking engagements or teach at educational
institutions, (D) serve as "Of Counsel" to Fulbright & Xxxxxxxx L.L.P.
and (E) manage personal investments. It is expressly understood and
agreed that to the extent that any such activities have been conducted
by the Executive prior to the date hereof, the continued conduct of
such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the date hereof shall not thereafter be
deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary of $100,000 ("Annual Base
Salary"), which shall be paid at a monthly rate. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12 months
after the last salary increase awarded to the Executive prior to the
date hereof and thereafter at least annually; provided, however, that a
salary increase shall not necessarily be awarded as a result of such
review. Any increase in Annual Base Salary may not serve to limit or
reduce any other obligation to the Executive under this Agreement.
Annual Base Salary shall not be reduced after any such increase. The
term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. The Executive shall be eligible
for an annual bonus (the "Annual Bonus") for each fiscal year ending
during the Employment Period on the same basis as other executive
officers under the Company's executive officer annual incentive
program. Each such Annual Bonus shall be paid no later than the end of
the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus pursuant to a Company sponsored
deferred compensation plan in effect.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to participate
in all incentive, savings and retirement plans, practices, policies and
programs applicable generally to the Executive's peer executives of the
Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with incentive
opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction
is applicable), savings opportunities and retirement benefit
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opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated
companies for the Executive under such plans, practices, policies and
programs as in effect on the date hereof. As used in this Agreement,
the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible to participate in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided
by the Company and its affiliated companies (including, without
limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to the Executive's peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Executive with benefits that are less
favorable, in the aggregate, than such plans, practices, policies and
programs in effect for the Executive on the date hereof.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all
reasonable expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and
its affiliated companies in effect for the Executive on the date
hereof.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits (including, without
limitation, financial planning services, payment of club dues, a car
allowance or use of an automobile and payment of related expenses, as
appropriate) in accordance with the most favorable plans, practices,
programs and policies of the Company in effect on the date hereof.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company
and its affiliated companies in effect for the Executive on the date
hereof.
(viii) Options. Effective as of the date hereof, the
Executive shall receive options under the Company's stock option plan
to purchase an aggregate of 240,000 shares of Common Stock, $.01 par
value, of the Company ("Common Stock"), at an exercise price per share
equal to the closing sale price of a share of Common Stock on the date
hereof, such options to be subject to three year cliff vesting, subject
to acceleration in the event of change of control of the Company or a
termination of employment of the Executive by the Company without Cause
or by the Executive for Good Reason or a termination of such employment
by mutual agreement in recognition of the fact that the services of the
Executive are primarily to provide transitional support to the Company
following the distribution by Weatherford of its shares of Common Stock
to the public and that the transitional support may no longer be
necessary.
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3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 10(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company for 180
calendar days as a result of incapacity due to mental or physical illness that
is determined to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the Executive's legal
representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written
demand for substantial performance is delivered to the Executive by the
Board or the Chief Executive Officer of the Company that specifically
identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the
Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct that is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act, or failure to act, on
the part of the Executive shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or of a senior officer of the Company or based upon the advice
of counsel for the Company shall be conclusively presumed to be done, or omitted
to be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i) or
(ii) above, and specifying the particulars thereof in detail.
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(c) Good Reason. The Executive's employment may be terminated
by the Executive during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements (other than the
title of "Interim General Counsel")), authority, duties or
responsibilities as contemplated by Section 2(a) of this Agreement, or
any other action by the Company that results in a diminution in such
position, authority, duties or responsibilities, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and that is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(ii) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 2(a) of this Agreement,
or any other action by the Company that results in a diminution in such
position, authority, duties or responsibilities, if there were to occur
a merger, consolidation or other business combination involving the
Company where the Company ceases to be publicly traded and following
the transaction the Executive does not have the status, office, title
and reporting requirements at the ultimate parent company that are
substantially similar to that which the Executive has with the Company;
(iii) any failure by the Company to comply with any
of the provisions of Section 2(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and that is remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 9(c) of this Agreement.
For purposes of this Section 3(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Executive for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 10(b) of the Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice that (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 30 days after the giving of
such notice). The failure by the Executive or
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the Company to set forth in the Notice of Termination any fact or circumstance
that contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Executive's employment is terminated by
the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be;
(ii) if the Executive's employment is terminated by
the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination; and
(iii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of the Executive or the Disability Effective Date, as the
case may be.
4. Obligations of the Company Upon Termination.
(a) Good Reason; Other than For Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause, death or Disability, or the Executive shall
terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate
of the following amounts:
(A) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I) the
highest Annual Bonus received by the Executive over the
preceding three year period (it being agreed that as of the
date of this Agreement, the Executive shall be deemed to have
received a bonus equal to 50% of his annual Base Salary in
respect of 1999) and (II) the Annual Bonus paid or payable,
including any bonus or portion thereof that has been earned
but deferred (and annualized for any fiscal year consisting of
less than 12 full months or during which the Executive was
employed for less than 12 full months), for the most recently
completed fiscal year during the Employment Period, if any
(such higher amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365, and (3) any
compensation previously deferred by the Executive under a plan
sponsored by the Company (together with any accrued interest
or earnings thereon), and any accrued vacation pay, in each
case to the extent not theretofore paid (the sum of the
amounts described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"), and
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(B) an amount equal to three times the sum
of (i) the then current Annual Base Salary of the Executive
and (ii) the Highest Annual Bonus, and
(C) an amount equal to the total of the
employer matching contributions credited to the Executive
under the Company's 401(k) Savings Plan (the "401(k) Plan") or
any other deferred compensation plan during the 12-month
period immediately preceding the month of the Executive's Date
of Termination multiplied by three, such amount to be grossed
up so that the amount the Executive actually receives after
payment of any federal or state taxes payable thereon equals
the amount first described above.
(ii) For a period of three years from the Executive's
Date of Termination (the "Remaining Contract Term") or such longer
period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family equal to those that would have
been provided to them in accordance with the plans, programs, practices
and policies described in Section 2(b)(iv) of this Agreement if the
Executive's employment had not been terminated; provided, however, that
with respect to any of such plans, programs, practices or policies
requiring an employee contribution, the Executive shall continue to pay
the monthly employee contribution for same, and provided further, that
if the Executive becomes reemployed by another employer and is eligible
to receive medical or other welfare benefits under another employer
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of eligibility;
(iii) The Company shall, at its sole expense as
incurred, provide the Executive with outplacement services, the scope
and provider of which shall be selected by the Executive in his sole
discretion;
(iv) With respect to all options to purchase Common
Stock held by the Executive pursuant to a Company stock option plan on
or prior to the Date of Termination, irrespective of whether such
options are then exercisable, the Executive shall have the right,
during the 60-day period after the Date of Termination, to elect to
surrender all or part of such options in exchange for a cash payment by
the Company to the Executive in an amount equal the number of shares of
Common Stock subject to the Executive's option multiplied by the
difference between (x) and (y) where (x) equals the purchase price per
share covered by the option and (y) equals the highest reported sale
price of a share of Common Stock in any transaction reported on the New
York Stock Exchange during the 60-day period prior to and including the
Executive's Date of Termination. Such cash payments shall be made
within 30 days after the date of the Executive's election; provided,
however, that if the Executive's Date of Termination is within six
months after the date of grant of a particular option held by the
Executive and the Executive is subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended, any cash payments related
thereto shall be made on the date that is six months and one day after
the date of grant of such option to the extent necessary to prevent the
imposition of the disgorgement provisions under Section 16(b).
Notwithstanding the foregoing, if any right granted pursuant to the
foregoing would make
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any change of control transaction ineligible for pooling of interests
accounting treatment under XXX Xx. 00 that but for this Section
4(a)(iv) would otherwise be eligible for such accounting treatment, the
Executive shall receive shares of Common Stock with a Fair Market Value
equal to the cash that would otherwise be payable hereunder in
substitution for the cash, provided that any such shares of Common
Stock so granted to the Executive shall be registered under the
Securities Act of 1933, as amended; any options outstanding as of the
Date of Termination or upon a change of control and not then
exercisable shall become fully exercisable as of the Executive's Date
of Termination, and to the extent the Executive does not elect to
surrender same for a cash payment (or the equivalent number of shares
of Common Stock) as provided above, such options shall remain
exercisable for one year after the Executive's Date of Termination or
until the stated expiration of the stated term thereof, whichever is
longer; restrictions applicable to any shares of Common Stock granted
to the Executive by the Company shall lapse, as of the date of the
Executive's Date of Termination;
(v) All country club memberships, luncheon clubs and
other memberships that the Company was providing for the Executive's
use at the time Notice of Termination is given shall, to the extent
possible, be transferred and assigned to the Executive at no cost to
the Executive (other than income taxes owed), the cost of transfer, if
any, to be borne by the Company;
(vi) The Company shall either transfer to the
Executive ownership and title to the Executive's company car at no cost
to the Executive (other than income taxes owed) or, if the Executive
receives a monthly car allowance in lieu of a Company car, pay the
Executive a lump sum in cash within 30 days after the Executive's Date
of Termination equal to the Executive's annual car allowance multiplied
by three;
(vii) All benefits under the Company's Executive
Deferred Compensation Plan and the 401(k) Plan and any other similar
plans, including any stock options or restricted stock held by the
Executive, not already vested shall be 100% vested, to the extent such
vesting is permitted under the Code (as defined below);
(viii) To the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any
other amounts or benefits required to be paid or provided or that the
Executive is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"); and
(ix) The foregoing payments are intended to
compensate the Executive for a breach of the Company's obligations and
place Executive in substantially the same position had the employment
of the Executive not been so terminated as a result of a breach by the
Company.
(b) Death. If Executive's employment is terminated by reason
of the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
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paid to the Executive's estate or beneficiaries, as applicable, in a lump sum in
cash within 30 days after the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 4(b)
shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the
estates and beneficiaries of the Executive's peer executives of the Company and
such affiliated companies under such plans, programs, practices and policies
relating to death benefits, if any, in effect on the date hereof or, if more
favorable, those in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days after the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
4(c) shall include, without limitation, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable benefits generally provided by the Company and
its affiliated companies to the Executive's disabled peer executives and/or
their families in accordance with such plans, programs, practices and policies
relating to disability, if any, in effect generally on the date hereof or, if
more favorable, those in effect at the time of the Disability.
(d) Cause; Other Than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than the
obligation to pay to the Executive (x) his or her Annual Base Salary through the
Date of Termination, (y) the amount of any compensation previously deferred by
the Executive and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
5. Other Rights. Except as provided hereinafter, nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any contract or agreement with the Company or any of its affiliated
companies. Except as provided hereinafter, amounts that are vested benefits or
that the Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company or any of
its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement. It is expressly agreed by the Executive that he or she shall have no
right to receive, and hereby waives any entitlement to, any severance pay or
similar benefit under any other plan, policy, practice or program of the
Company. In addition, if the Executive has an employment or similar agreement
with the Company at the Date of Termination, he or she agrees that he or she
shall have the right to receive all of the benefits
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provided under this Agreement or such other agreement, whichever one, in its
entirety, the Executive chooses, but not both agreements, and when the Executive
has made such election, the other agreement shall be superseded in its entirety
and shall be of no further force and effect. The Executive also agrees that to
the extent he or she may be eligible for any severance pay or similar benefit
under any laws providing for severance or termination benefits, such other
severance pay or similar benefit shall be coordinated with the benefits owed
hereunder, such that the Executive shall not receive duplicate benefits.
Benefits provided under any Xxxxxxxxxxx International, Inc. plan shall not be
considered an employment or other arrangement with the Company.
6. Full Settlement.
(a) No Rights of Offset. 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 set-off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against the
Executive or others.
(b) No Mitigation Required. In no event shall the Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Executive
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expense that the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Executive of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
7. Certain Additional Payments by the Company.
(a) Although this Agreement is not being entered into in
connection with or contingent upon a change of control of the Company, anything
in this Agreement to the contrary notwithstanding and except as set forth below,
in the event it shall be determined that any payment or distribution 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 Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 7) (a "Payment") would be subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.
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Notwithstanding the foregoing provisions of this Section 7(a), if it shall be
determined that the Executive is entitled to a Gross-Up Payment, but that the
Executive, after taking into account the Payments and the Gross-Up Payment,
would not receive a net after-tax benefit of at least $50,000 (taking into
account both income taxes and any Excise Tax) as compared to the net after-tax
proceeds to the Executive resulting from an elimination of the Gross-Up Payment
and a reduction of the Payments, in the aggregate, to an amount (the "Reduced
Amount") such that the receipt of Payments would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a 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 Xxxxxx Xxxxxxxx LLP or, as provided below, such other certified public
accounting firm as may be designated by the Executive (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Executive within 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 the change of control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 7, shall be paid by the Company to the
Executive within five days after the receipt of the Accounting Firm's
determination. 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 ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 7(c) and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment (or an additional Gross-Up
Payment) in the event the IRS seeks higher payment. Such notification shall be
given as soon as practicable, but no later than ten business days after the
Executive is informed 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
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to contest such claim,
the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
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(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith
effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claims; provided, however, that the
Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
costs 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 7(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Executive to pay such claim and xxx for
a refund, the Company shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issues raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 7(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of Section 7(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 7(c), 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 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.
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8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, that shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies, provided that it shall not apply to information that is or shall
become public knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement), information that is developed
by the Executive independently of such information, or knowledge or data or
information that is disclosed to the Executive by a third party under no
obligation of confidentiality to the Company. After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and shall not
be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to 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
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid that assumes and agrees to perform this Agreement by operation of law,
or otherwise.
10. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICT OF LAWS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive: Xxxxxx X. Xxxx
Xxxxxxxxxxx International, Inc.
000 Xxxx Xxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
If to the Company: Grant Prideco, Inc.
0000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx
with a copy to: Xxxxxxx X. Xxxxxxx
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any 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(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Xxxxxx X. Xxxx
----------------------------------------
Xxxxxx X. Xxxx
GRANT PRIDECO, INC.
By /s/ Xxxx X. Xxxxx
----------------------------------------
Xxxx X. Xxxxx
President
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