EXHIBIT 10.26
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement"), dated effective the
8/th/ day of October, 2002 (the "Effective Date"), is entered into by and
between Dresser, Inc., a Delaware corporation (the "Employer") and Xxxxxx X.
Xxxx ("Employee"), and amends and restates in its entirety the Executive
Employment Agreement dated as of the same date.
WITNESSETH:
WHEREAS, Employer, as of November 4, 2002 (the "Agreement Date"), desires
to employ Employee pursuant to the terms and conditions set forth herein and
Employee desires to accept such employment pursuant to the terms and conditions
set forth herein;
WHEREAS, 85% of the outstanding voting securities (on a fully diluted
basis) of Dresser, Ltd., a Bermuda corporation, are owned by DEG Acquisitions,
L.L.C. ("DEG");
WHEREAS, Dresser Holding, Ltd. ("DHL") is a wholly owned subsidiary of
Dresser, Ltd.;
WHEREAS, Dresser Holding, Inc. ("DHI") is a wholly owned subsidiary of DHL;
WHEREAS, Employer is a wholly owned subsidiary of DHI;
WHEREAS, Dresser, Ltd. and Employer are referred to collectively as the
"Principal DEG Entities";
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, Employer and Employee agree as follows:
ARTICLE 1: EMPLOYMENT AND DUTIES:
1.1 Employer agrees to employ Employee, and Employee agrees to be employed
by Employer, beginning as of the Agreement Date and continuing until the third
anniversary of the Agreement Date (the "Initial Term"), subject to the terms and
conditions of this Agreement. Commencing on the first anniversary of the
Agreement Date, the Initial Term will be automatically extended each day by one
day, until two years following the date on which either party delivers to the
other written notice of termination in accordance with the provisions of Section
7.3 below. Employer acknowledges and agrees that Employee is accepting
employment hereunder in reliance upon the facts set forth in the Whereas clauses
set forth above, which Employer represents and warrants to be true and correct
in all respects.
1.2 Beginning as of the Agreement Date, Employee shall be employed as the
President of Employer and will serve as a member of the Board of Directors of
Employer (the "Board"). Commencing on a date to be determined by Employer, but
no later than December 31, 2004, Employee will also serve as Chief Executive
Officer of Employer. As President,
Employee will report directly to the Chief Executive Officer of Employer ("CEO")
and the Board, and Employee's duties will include such functions and operations
consistent with Employee's title and assigned him from time to time by the CEO
or the Board. Employee agrees to perform such functions and operations
diligently and to the best of Employee's abilities as well as such additional or
different duties and services appropriate to such positions which Employee from
time to time may be reasonably directed to perform by the CEO or the Board.
1.3 Employee shall at all times comply with and be subject to such policies
and procedures as Employer may establish from time to time, including, without
limitation, Employer's Code of Business Conduct (the "Code of Business
Conduct"), which at any time during the period of his employment by Employer
have been furnished in writing to Employee.
1.4 Employee shall, during the period of Employee's employment by Employer,
devote Employee's full business time, energy, and best efforts to the business
and affairs of Employer. Employee may not engage, directly or indirectly, in any
other business, investment, or activity that materially interferes with
Employee's performance of Employee's duties hereunder, is contrary to the
interest of Employer or any of Dresser, Ltd.'s current or future affiliated
subsidiaries (each a "Dresser Entity", or collectively, the "Dresser Entities"),
or requires any significant portion of Employee's business time. The foregoing
notwithstanding, the parties recognize and agree that Employee may engage in
passive personal investments and other business activities which do not conflict
with the business and affairs of the Dresser Entities or materially interfere
with Employee's performance of his duties hereunder. In addition, Employee may
serve on not more than two (2) corporate, civic, or charitable boards of
directors, provided that he first obtain approval to serve on any for-profit
corporate boards in accordance with Employer's policies and procedures regarding
such service to the extent previously furnished in writing to Employee. Employee
shall be permitted to retain any compensation received for approved service on
any unaffiliated corporation's board of directors.
1.5 Employee acknowledges and agrees that Employee owes a fiduciary duty of
loyalty, fidelity, and allegiance to act at all times in the best interests of
Employer and the other Dresser Entities and to do no act which would, directly
or indirectly, injure any such entity's business, interests, or reputation. It
is agreed that any direct or indirect interest in, connection with, or benefit
from any outside activities, particularly commercial activities, which interest
might in any way adversely affect Employer, or any other Dresser Entity,
involves a possible conflict of interest. In keeping with Employee's fiduciary
duties to Employer, Employee agrees that Employee shall not knowingly become
involved in a conflict of interest with Employer or any Dresser Entity, or upon
discovery thereof, allow such a conflict to continue. Moreover, Employee shall
not engage in any activity that is reasonably likely to involve a possible
conflict of interest without first obtaining approval in accordance with
Employer's policies and procedures.
1.6 Nothing contained herein shall be construed to preclude the transfer of
Employee's employment to another Dresser Entity or Entities ("Subsequent
Employer") as of,
2
or at any time after, the Agreement Date and no such transfer shall be deemed to
be a termination of employment for purposes of Article 3 hereof; provided,
however, that (1) effective with such transfer, all of Employer's obligations
hereunder shall be assumed by and be binding upon, and all of Employer's rights
hereunder shall be assigned to, such Subsequent Employer, jointly and severally
with Employer in all respects, and the defined term "Employer" as used herein
shall thereafter be deemed amended to include such Subsequent Employer, (2)
Employee shall be President, a member of the board of directors and, after
December 31, 2004, Chief Executive Officer, of each of the one or more companies
that in the aggregate hold and/or are the successor or successors to all or
substantially all of the business of Employer ("Employer Successors"), (3)
Employer shall remain jointly and several liable and bound by this Agreement,
and (4) nothing in this Section 1.6 shall alter the definition of, or Employee's
rights associated with, Employee Cause (as defined in Section 3.4(i) below), or
a Change of Control (as defined in Section 7.2 below). Except as otherwise
provided above, all of the terms and conditions of this Agreement, including
without limitation, Employee's rights and obligations, shall remain in full
force and effect following such transfer of employment. An example of such an
assignment may be the division of Employer into two separate corporate entities
which each assume a portion of Employer's business and which each then shall
become Employers, or the assignment of Employee's contract to a Dresser Entity
which purchases all or substantially all of the assets of Employer, which
purchaser will then become an Employer.
ARTICLE 2: COMPENSATION AND BENEFITS:
2.1 From the Agreement Date to the date of termination of Employee's
employment pursuant to the provisions of Article 3 (the "Termination Date"),
Employee's base salary shall be not less than $650,000 per annum, which shall be
paid by Employer in accordance with its standard payroll practice for its
executives. Employee's base salary may be increased from time to time. Such
increased base salary shall become the minimum base salary under this Agreement
and may not be decreased thereafter without the written consent of Employee.
2.2 From the Agreement Date to the Termination Date, Employee will be
eligible for an Annual Bonus to be awarded, if at all, based on achievement of
performance goals established annually by the Board, in consultation with
Employee, within the first ninety days of Employer's fiscal year. The Board will
reasonably determine whether these performance goals have been met and the
amount of any Annual Bonus in its sole discretion, subject to the following
guidelines: (1) the Target Annual Bonus will be equal to 50% of Employee's base
salary and the Maximum Annual Bonus will be equal to 100% of Employee's base
salary; (2) the Board may increase the Target Annual Bonus or the Maximum Annual
Bonus at any time, but may not decrease them without Employee's express written
consent; and (3) the Annual Bonus to be paid under the severance provisions of
Sections 3.3 or 3.5, should they become applicable, will be the Target Annual
Bonus.
2.3 Within fourteen (14) calendar days of the Agreement Date, Employer will
pay Employee an Initial Signing Bonus of $355,000. In addition, no later than
December 31, 2003, Employee will receive (assuming he remains employed by
Employer) a First Retention Bonus
3
of no less than $50,000 and no more than $325,000. The Board will determine the
precise amount of the First Retention Bonus in its discretion, based on
achievement of the same performance goals upon which the Annual Bonus will be
based for fiscal year 2003. No later than December 31, 2004, Employee will also
receive (assuming he remains employed by Employer) a Second Retention Bonus of
no less than $50,000 and no more than $325,000. The Board will determine the
precise amount of the Second Retention Bonus in its discretion, based on
achievement of the same performance goals upon which the Annual Bonus will be
based for fiscal year 2004.
2.4 From the Agreement Date to the Termination Date, Employee will receive
a perquisite allowance as the Board may establish from time to time for senior
executive employees. In addition, Employer shall pay or reimburse Employee for
all actual, reasonable and customary expenses incurred by Employee in the course
of his employment; provided that such expenses are incurred and accounted for in
accordance with Employer's applicable policies and procedures.
2.5 From the Agreement Date to the Termination Date, Employee shall be
allowed to participate, on the same basis as other senior executive employees of
Employer, in all general employee benefit plans and programs, including
improvements or modifications of the same, which on the Agreement Date or
thereafter are made available by Employer to Employer's similarly situated
executive employees, excluding, however, those plans established by predecessors
of Employer which as of the Effective Date are not generally open to new
participants. Such benefits, plans, and programs may include, without
limitation, medical, health, and dental care, life insurance, disability
protection, and qualified and non-qualified retirement plans. Except as
specifically provided herein, nothing in this Agreement is to be construed or
interpreted to increase or alter in any way the rights, participation, coverage,
or benefits under such benefit plans or programs than provided to similarly
situated executive employees pursuant to the terms and conditions of such
benefit plans and programs.
2.6 Notwithstanding anything to the contrary in this Agreement, with the
exception of equity based incentives and option plans pursuant to which Employee
has received, or is contractually entitled to receive, any awards, it is
specifically understood and agreed that Employer shall not be obligated to
institute, maintain, or refrain from changing, amending, or discontinuing any
incentive, compensation, or employee benefit program or plan, so long as such
actions are similarly applicable to covered employees generally.
2.7 Employer may withhold from any compensation, benefits, or amounts
payable under this Agreement all federal, state, city, or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
ARTICLE 3: TERMINATION OF EMPLOYMENT AND EFFECTS OF SUCH TERMINATION:
3.1 Employee's employment with Employer shall be terminated (i) upon the
death of Employee, (ii) upon Employee's Retirement (as defined below), (iii)
upon Employee's
4
Permanent Disability (as defined below), (iv) at any time by Employer upon
notice to Employee, or (v) by Employee upon thirty (30) days' notice to
Employer, for any or no reason.
3.2 If Employee's employment is terminated by reason of any of the
following circumstances (i), (ii), or (iii), Employee shall be entitled to
receive the benefits set forth only in Section 3.3 below:
(i) Retirement. "Retirement" shall mean either (a) Employee's
retirement at or after normal retirement age (either voluntarily
or pursuant to Employer's retirement policy) or (b) the voluntary
termination of Employee's employment by Employee in accordance
with Employer's early retirement policy.
(ii) Employer Termination for Cause. Termination of Employee's
employment by Employer for Employer Cause shall mean a termination
of employment at the election of Employer when there is "Employer
Cause". "Employer Cause" shall mean any of the following: (a)
Employee's gross negligence or willful misconduct in the
performance of the duties and services required of Employee
pursuant to this Agreement that results in or with the passage of
time poses a reasonable risk of material financial detriment to
Employer, (b) Employee's final conviction of or plea of guilty or
nolo contendere to a felony or Employee engaging in fraudulent or
criminal activity relating to the scope of Employee's employment
(whether or not prosecuted), (c) a material violation of the Code
of Business Conduct, provided that it has been provided to
Employee in writing prior to such alleged violation; (d)
Employee's material breach of any material provision of this
Agreement, provided that Employee has received written notice from
Employer and been afforded a reasonable opportunity (not to exceed
30 days) to cure such breach, or (e) any continuing or repeated
failure to perform the duties as requested in writing by the Board
after Employee has been afforded a reasonable opportunity (not to
exceed 30 days) to cure such breach. Determination as to whether
or not Employer Cause exists for termination of Employee's
employment will be made by not less than 75% of the members of the
Board at a meeting in which Employee shall have the right (a) to
have received not less than 10 days prior to the meeting written
notice of the date, time and place of the meeting and the charges
(in reasonable detail) to be considered, (b) to appear at the
meeting with counsel, and (c) to answer any charges made
concerning the existence of Employer Cause. Any determination by
the Board of Employer Cause at such meeting shall not be entitled
to any deferential or evidentiary weight or presumption of
correctness, and at the election of Employee, shall be determined
pursuant to Section 7.7 in a de novo review, with Employer having
the obligation to prove Employer Cause by clear and convincing
evidence. During the foregoing process, Employer may, without
Employer creating any default under this Agreement or incurring
any additional liability of any kind and at Employer's sole
discretion, place Employee on paid administrative leave and
relieve Employee of all or any part of his responsibilities.
Notwithstanding the foregoing, and regardless of whether the
5
process results in a finding that Employer Cause existed for the
termination, the year in which such termination shall be deemed to
have occurred, for purposes of determining Employee's entitlement
to payments of unpaid Annual Bonus, Initial Signing Bonus, or
Retention Bonus, shall be the year in which Employer first informs
Employee that he is terminated for Employer Cause. "Employer
Cause" shall not mean any of the following: (a) Employee's bad
judgment; (b) Employee's negligence; (c) any act or omission that
Employee believed in good faith was in or was not opposed to the
interests of Employer; or (d) any act or omission of which any
non-employee member of the Board who is not a party to such act or
omission had actual knowledge for at least six (6) months.
(iii) Resignation, Other Than For Cause. Termination of Employee's
employment by resignation other than for Employee Cause as
described in Section 3.4(i).
3.3 If Employee's employment is terminated by reason of Section 3.2 (i),
(ii), or (iii), Employee shall be entitled to each of the following:
(i) Employee shall be entitled to a pro rata base salary (pro rated
through the date of termination as if it accrued throughout the
year on a daily basis) through the date of such termination and
shall be entitled to any earned but unpaid Annual Bonus, Initial
Signing Bonus, or Retention Bonus payable for years prior to the
year of Employee's termination of employment, but shall not be
entitled to any Annual Bonus or Retention Bonus for the year in
which he terminates employment or any other payments or benefits
by or on behalf of Employer except for those which may be payable
pursuant to the terms of Employer's employee benefit plans (as
defined in Section 3.7), stock options or other equity interests
or the applicable agreements underlying such plans, or, Section
3.3(ii) of this Agreement in the event that Employer makes the
applicable election thereunder.
(ii) If Employee's employment is terminated for reasons under Section
3.2 (i), (ii) or (iii), then Employer, at its sole option, shall
be entitled to enforce the covenant not to compete and other
conditions set forth in Article 5 herein for a period not to
exceed two (2) years. In the event that Employer elects to trigger
such option, Employer agrees to pay an amount equal to Employee's
base salary and the Target Annual Bonus (both based upon
Employee's last base salary amount prior to termination) and
minimum Retention Bonus for a period of two (2) years. Payments to
Employee for the base salary amount shall be in equal installments
in accordance with Employer's customary payroll practices over the
two year period. Payments of the Target Annual Bonus and minimum
Retention Bonus shall be made at the time such a payment is made
to similarly situated employees. In the event that Employee
willfully and materially breaches any of the terms of Article 5
during the aforementioned two (2) year period, then Employer shall
be entitled to immediately cease making further payments to
Employee, retroactively treat Employee's termination as being an
"Employer Termination For Cause" and recover from Employee any
consideration that has previously been paid to
6
Employee which is inconsistent with an "Employer Termination For
Cause," and, in addition, shall be entitled to seek damages and
such other relief (including an injunction against Employee) to
which it is entitled under the law. Employee agrees that any
payment under this Article constitutes full and adequate
consideration to Employee's obligations under Article 5.
3.4 If Employee's employment is terminated by reason of (i), (ii), (iii),
or (iv) below, Employee shall be entitled to receive the benefits set forth in
Section 3.5 or Section 3.6, as applicable.
(i) Employee Termination For Cause. "Employee Termination For Cause"
shall mean a termination of employment at the election of Employee
when there is "Employee Cause". "Employee Cause" shall mean a
termination of employment by Employee for any reason or no reason
within the ninety (90) calendar day period commencing twelve (12)
calendar months after a Change of Control as defined in Section
7.2 of Employer; or a termination of employment by Employee
because and within six months of: (a) a material breach by
Employer of any material provision of this Agreement which remains
uncorrected for thirty (30) days following written notice of such
breach by Employee to Employer; (b) a material reduction in
Employee's status, position, responsibilities, or compensation
which remains unrestored for thirty (30) days following written
notice of such occurrence by Employee to Employer; (c) any failure
to employ, maintain, nominate, or elect Employee as President of
Employer or as a member of the Board; (d) any failure to employ,
appoint, or maintain Employee as Chief Executive Officer of
Employer by no later than December 31, 2004; (e) an act causing or
requiring Employee to report to anyone other than the Chief
Executive Officer, the Board or a Committee or member of the
Board; (f) an assignment of duties materially inconsistent with
Employee's position and responsibilities described in this
Agreement which is not promptly changed within ten (10) days of
written notice by Employee to the Board of such material
inconsistency; (g) the failure of an Employer to assign this
Agreement, as permitted pursuant to Section 1.6, to any one or
more Employer Successor; (h) material interference by any officer,
employee, director, board of directors, member, partner, manager
or other agent of any Dresser Entity (other than Employer) in
Employee's performance of his duties hereunder or exercise of his
authority as President (or, to the extent he is then CEO, as CEO)
of Employer which, to the extent it is capable of correction,
remains uncorrected for thirty (30) days following written notice
of such breach by Employee to Employer; or (i) the failure to
issue, within ninety (90) days of the Effective Date, stock
options pursuant to and as described in the letter agreement
attached as Exhibit A hereto, which is incorporated herein by
reference in its entirety. Determination as to whether or not
Employee Cause exists for termination of Employee's employment
will be made by the Board at a meeting in which Employee shall
have the right to present his case for the existence of Employee
Cause with, at his election, the assistance of counsel. Any
determination by the Board of Employee Cause at such meeting shall
not be
7
entitled to any deferential or evidentiary weight or presumption
of correctness and at the election of Employee shall be determined
pursuant to Section 7.7 in a de novo review, with the Employee
having the obligation to prove Employee Cause by clear and
convincing evidence. During the foregoing process, Employer may,
without Employer creating any default under this Agreement or
incurring any additional liability of any kind and at Employer's
sole discretion, place Employee on paid administrative leave and
relieve Employee of all or any part of his responsibilities.
Notwithstanding the foregoing, and regardless of whether the
process results in a finding that Employee Cause existed for the
termination, the year in which such termination shall be deemed to
have occurred, for purposes of determining Employee's entitlement
to payments of unpaid Annual Bonus, Initial Signing Bonus, or
Retention Bonus, shall be the year in which Employee first informs
Employer that he is terminating his employment for Employee Cause.
(ii) Employer Termination Without Employer Cause. Termination of
Employee's employment by Employer without Employer Cause shall
mean a termination of employment of Employee by Employer for no
reason or any reason other than one set forth in Section 3.2(ii).
(iii) Death.
(iv) Permanent Disability. "Permanent Disability" shall mean Employee's
physical or mental incapacity to perform his usual duties with or
without reasonable accommodations for a period of not less than 90
days within a given twelve month period with such condition likely
to remain continuously and permanently as determined by Employer.
3.5 If Employee's employment is terminated by Employee under Section 3.4
(i) or by Employer under Section 3.4 (ii), Employee shall be entitled to each of
the following:
(i) Employee's (1) earned but unpaid base salary; (2) earned but
unpaid Annual Bonus, Initial Signing Bonus, and Retention Bonus
payable for years prior to the year of Employee's termination of
employment; and (3) unpaid Target Annual Bonus and minimum
Retention Bonus for the year of termination, pro rated through the
date of termination as if it accrued throughout the year on a
daily basis. Such amounts shall be paid to Employee in a single
lump sum cash payment no later than thirty (30) days following
Employee's termination of employment.
(ii) Subject to the provisions of Section 3.7, Employer shall pay to
Employee a severance benefit consisting of continued periodic
payments of Employee's base salary as in effect at the date of
Employee's termination of employment and his Target Annual Bonus
(based upon Employee's last base salary amount prior to
termination) for each year during the Severance Term (as defined
below) in accordance with Employer's customary payroll practices
during the period (the "Severance Term") commencing on the
effectiveness of such termination and
8
ending on the earlier of (A) the third anniversary of the date of such
termination, or (B) the date Employee willfully and materially violates
any of the covenants set forth in Article 4 or Article 5 hereof.
Notwithstanding the foregoing, if Employer terminates Employee in
anticipation of or within one year following a Change of Control (and
excluding a termination for Employer Cause), Employer shall pay to
Employee a severance benefit consisting of three times Employee's base
salary as in effect at the date of Employee's termination of employment
and three times his Target Annual Bonus (based upon Employee's last base
salary amount prior to termination) in a single lump sum cash payment no
later than thirty (30) days following Employee's termination of
employment.
(ii) For as long as Employee continues to receive a severance benefit
pursuant to Section 3.5(ii) (or for a period of three years following
Employee's termination because of a Change of Control), Employee shall
be allowed to participate, on the same basis generally as other senior
executive employees of Employer, in all applicable employee benefit
plans and programs, including improvements or modifications of the same,
which are made available by Employer to Employer's similarly situated
actively employed executive employees, excluding, however, those plans
established by predecessors of Employer which as of the Effective Date
are not generally open to new participants. Such benefits, plans, and
programs may include, without limitation, medical, health, and dental
care, life insurance, disability protection, and qualified and
non-qualified retirement plans. Except as specifically provided herein,
nothing in this Agreement is to be construed or interpreted to increase
or alter in any way the rights, participation, coverage, or benefits
under such benefit plans or programs than provided to similarly situated
executive employees pursuant to the terms and conditions of such benefit
plans and programs; provided, however, at the option of Employer,
Employer may upon sixty (60) days advance written notice effective at
any time more than eighteen months after such termination elect to
provide Employee with the cash value of providing such benefits from a
third party (which cash value shall not exceed 125% of Employer's
historic out-of-pocket cost of providing such benefits).
3.6 If Employee's employment is terminated by reason of Section 3.4 (iii)
or (iv), Employee's estate, in the case of death, or Employee or his legal
guardian, in the case of Permanent Disability, shall be entitled to payment of
Employee's (1) unpaid base salary; (2) earned but unpaid Annual Bonus, Initial
Signing Bonus, and Retention Bonus payable for years prior to the year of
Employee's termination of employment; and (3) earned but unpaid Annual Bonus
for the year of termination, pro rated through the date of termination as if it
accrued throughout the year on a daily basis, of the Target Amount. Such
amounts shall be paid in a single lump sum cash payment no later than thirty
(30) days following Employee's termination of employment.
3.7 The severance benefit paid to Employee pursuant to Section 3.3 or
Section 3.5 above shall be in consideration of Employee's continuing
obligations hereunder after such
9
termination, including, without limitation, Employee's obligations under
Article 4 and Article 5. Further, as a condition to the receipt of such
severance benefit, Employer, in its sole discretion, may require Employee to
first execute a release, in the form established by Employer, releasing
Employer and all other Dresser Entities, and their officers, directors,
employees, and agents, from any and all claims and from any and all causes of
action of any kind or character, including, but not limited to, all claims and
causes of action arising out of Employee's employment with Employer or any
other Dresser Entities or the termination of such employment; provided that
Employee shall not be expected to waive any rights accruing under this
Agreement, including but not limited to rights to indemnification and coverage
under directors' and officers' liability insurance, rights to benefits under
the terms of applicable benefit plans of Employer including health benefits,
rights to option and/or equity incentive plan participation and rights with
respect to any stock or other rights acquired thereunder ("Retained Rights").
The performance of Employer's obligations under Section 3.3 or Section 3.5 and
the receipt of the severance benefit provided thereunder by Employee and
provision of the Retained Rights shall constitute full settlement of all such
claims and causes of action. Employee shall not be under any duty or obligation
to seek or accept other employment following a termination of employment
pursuant to which a severance benefit payment under Section 3.3 or Section 3.5
is owing and the amounts due Employee pursuant to Section 3.3 or Section 3.5
shall not be reduced or suspended if Employee accepts subsequent employment or
earns any amounts as a self-employed individual. Employee's rights under
Section 3.3 or Section 3.5 and the Retained Rights are Employee's sole and
exclusive rights against Employer, or any affiliate of Employer, and Employer's
sole and exclusive liability to Employee under this Agreement, whether such
claim is based in contract, tort or otherwise, for the termination of his
employment relationship with Employer. Employee agrees that all disputes
relating to Employee's employment or termination of employment shall be
resolved as provided in Section 7.7 hereof; provided, however, that decisions
as to whether and as of what date Employee has become permanently disabled
shall be limited to whether such decision was reached by a mutually acceptable
medical expert. Nothing contained in this Article 3 shall be construed to be a
waiver by Employee of any benefits accrued for or due Employee under any
employee benefit plan (as such term is defined in the Employees' Retirement
Income Security Act of 1974, as amended) maintained by Employer except that
Employee shall not be entitled to any severance benefits pursuant to any
severance plan or program of Employer.
3.8 Termination of the employment relationship does not terminate those
obligations imposed by this Agreement, which are continuing obligations,
including, without limitation, Employee's obligations under Article 4 and
Article 5.
3.9 The payment of any monies to Employee under this Agreement after the
date of termination of employment does not constitute an offer or a
continuation of employment of Employee. In no event shall Employee represent or
hold himself out to be an employee of Employer after the date of termination of
employment. Except as provided in Article 6, Employee shall be responsible for
any and all federal, state, or local taxes that arise out of any payments to
Employee hereunder (subject to the obligation of Employer under law to submit
to the applicable taxing authorities any amounts withheld from Employer's
compensation on account of any such taxes).
10
3.10 During any period during which any monies are being paid to Employee
under this Agreement after the date of termination, Employee shall provide to
Employer reasonable levels of assistance to Employer in answering questions
concerning the business of Employer, transition of responsibility, or
litigation, provided that all out of pocket expenses of Employee reasonably
incurred in connection with such assistance is fully and promptly reimbursed
and that any such assistance after the Non-Compete Period (as defined below)
shall not interfere or conflict with the obligations which Employee may owe to
any other employer.
ARTICLE 4: OWNERSHIP AND PROTECTION OF INTELLECTUAL PROPERTY AND CONFIDENTIAL
INFORMATION:
4.1 All information, ideas, concepts, improvements, discoveries, and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by Employee, individually or in conjunction with others, during
Employee's employment by Employer or any of the other Dresser Entities (whether
during business hours or otherwise and whether on Employer's premises or
otherwise) which relate to the business, products or services of Employer or
the other Dresser Entities (including, without limitation, all such information
relating to corporate opportunities, research, financial and sales data,
pricing and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customer's organizations or within the organization of
acquisition prospects, or marketing and merchandising techniques, prospective
names, and marks), and all writings or materials of any type embodying any of
such items, shall be the sole and exclusive property of Employer or another
Dresser Entity, as the case may be, and shall be treated as "work for hire".
4.2 Employee acknowledges that the businesses of Employer and the other
Dresser Entities are highly competitive and that their strategies, methods,
books, records, and documents, their technical information concerning their
products, equipment, services, and processes, procurement procedures and
pricing techniques, the names of and other information (such as credit and
financial data) concerning their customers and business affiliates, all
comprise confidential business information and trade secrets which are
valuable, special, and unique assets which Employer or the other Dresser
Entities use in their business to obtain a competitive advantage over their
competitors. Employee further acknowledges that protection of such confidential
business information and trade secrets against unauthorized disclosure and use
is of critical importance to Employer and the other Dresser Entities in
maintaining their competitive position. Employee hereby agrees that Employee
will not, at any time during or after his employment by Employer, make any
unauthorized disclosure of any confidential business information or trade
secrets of Employer or the other Dresser Entities, or make any use thereof,
except in the carrying out of his employment responsibilities hereunder.
Confidential business information shall not include information in the public
domain (but only if the same becomes part of the public domain through a means
other than a disclosure prohibited hereunder). The above notwithstanding, a
disclosure shall not be unauthorized if (i) it is required by law or by a court
of competent jurisdiction or (ii) it is in connection with any judicial,
arbitration, dispute resolution or other legal proceeding in which Employee's
legal
11
rights and obligations as an employee or under this Agreement are at issue;
provided, however, that Employee shall, to the extent practicable and lawful in
any such events, give prior notice to Employer of his intent to disclose any
such confidential business information in such context so as to allow Employer
or any other Dresser Entity an opportunity (which Employee will not oppose) to
obtain such protective orders or similar relief with respect thereto as may be
deemed appropriate.
4.3 All written materials, records, and other documents made by, or coming
into the possession of, Employee during the period of Employee's employment by
Employer which contain or disclose confidential business information or trade
secrets of Employer or the other Dresser Entities shall be and remain the
property of Employer, or the other Dresser Entities, as the case may be. Upon
termination of Employee's employment by Employer, for any reason, Employee
promptly shall deliver the same, and all copies thereof, to Employer.
ARTICLE 5: COVENANT NOT TO COMPETE:
5.1 From the Agreement Date to the Termination Date, and for a period of
three (3) years thereafter, if termination of employment is under Section 3.4
above, or for the period that payments are made pursuant to Section 3.3 (iv) if
termination of employment is under Section 3.2 (the "Non-Compete Period"), he
will not, in association with or as an officer, principal, member, advisor,
agent, partner, director, material stockholder, employee or consultant of any
corporation (or sub-unit, in the case of a diversified business) or other
enterprise, entity or association, work on the acquisition or development of,
or engage in any line of business, property or project in which Employee (i) is
involved in or responsible for on the date of such termination, or (ii) has
worked with or evaluated in the last year and which were still being pursued or
evaluated by a Dresser Entity within one month of the time of such termination.
Such restriction shall cover Employee's activities anywhere in the world.
5.2 From the Agreement Date to the Termination Date and during the
Non-Compete Period, Employee will not solicit or induce any person who is or
was employed by any of the Dresser Entities at any time during such term or
period, excluding employees who may have left their employment by such Dresser
Entity more than 60 days prior to being hired or solicited for employment by
Employee, (A) to interfere with the activities or businesses of any Dresser
Entity or (B) to discontinue his or her employment with any of the Dresser
Entities, or employ any such person in a business or enterprise which competes
with any of the Dresser Entities.
5.3 From the Agreement Date to the Termination Date or during the
Non-Compete Period, Employee will not, directly or indirectly, influence or
attempt to influence any customers, distributors or suppliers of any of the
Dresser Entities to divert their business to any competitor of the Dresser
Entities or their affiliates.
5.4 Employee understands that the provisions of Article 5 hereof may limit
his ability to earn a livelihood in a business similar to the business in which
he is involved, but as an executive officer of Employer he nevertheless agrees
and hereby acknowledges that (i) such provisions do not impose a greater
restraint than is necessary to protect the goodwill or other
12
business interests of Employer and any of the other Dresser Entities; (ii) such
provisions contain reasonable limitations as to time, scope of activity, and
geographical area to be restrained; and (iii) the consideration provided
hereunder, including without limitation, any amounts or benefits provided under
Article 3 hereof, is sufficient to compensate Employee for the restrictions
contained in Article 5 hereof. In consideration of the foregoing and in light
of Employee's education, skills and abilities, Employee agrees that he will not
assert that, and it should not be considered that, any provisions of Article 5
otherwise are void, voidable or unenforceable or should be voided or held
unenforceable.
5.5 Employee acknowledges and agrees that his duties with Employer are of
an executive nature and that he is a member of Employer's management group.
Employee agrees that the remedy at law for any breach by him of any of the
covenants and agreements set forth in this Article 5 will be inadequate and
that in the event of any such breach, Employer may, in addition to the other
remedies which may be available to it at law, and pursuant to Section 5.7 of
this Agreement obtain injunctive relief prohibiting Employee (together with all
those persons associated with him) from the breach of such covenants and
agreements.
5.6 Each of the covenants of this Article 5 are given by Employee as part
of the consideration for this Agreement and as an inducement to Employer to
enter into this Agreement and accept the obligations hereunder.
5.7 In the event of a willful and material breach of any of the covenants
of this Article 5, the parties agree that the damages to Employer could be
significant and will be extremely difficult or impracticable to ascertain.
Based upon the facts as known by the parties at the time of this Agreement, the
parties agree that any payments Employee has received pursuant to Article 3 as
of the date of any willful breach constitutes reasonable liquidated damages due
Employer.
ARTICLE 6: EXCISE TAX GROSS-UP PROVISIONS:
6.1 Anything in this Agreement to the contrary notwithstanding, and except
as set forth below, in the event it shall be determined that any Payment would
be subject to the Excise Tax, then Employee shall be entitled to receive an
additional payment (the "Gross-Up Payment") in an amount such that, after
payment by Employee of all Taxes, including any income taxes and Excise Tax
imposed upon the Gross-Up Payment, Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 6.1, if it shall be determined that
Employee is entitled to the Gross-Up Payment, but that the Parachute Value of
all Payments does not exceed one hundred and ten percent (110%) of the Safe
Harbor Amount, then except as provided below, no Gross-Up Payment shall be made
to Employee and the amounts payable under this Agreement or under any other
agreement between Employee and Employer or its affiliates, other than amounts
or benefits provided under the letter agreement attached as Exhibit A hereto or
pursuant to any other option or equity grants to Employee (the "Subject
Payments"), shall be reduced (but not below zero) so that the Parachute Value
of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction
of the amounts payable
13
hereunder, if applicable, shall be made by first reducing any payments under
Section 3.3(ii) or Section 3.5(ii) of this Agreement, and in any event shall be
made in such a manner as to maximize the Value of all Payments actually made to
Employee. For purposes of reducing the Parachute Value of all Payments to the
Safe Harbor Amount, only the Subject Payments shall be reduced. If the
reduction of the Subject Payments would not result in a reduction of the
Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable
under the Agreement shall be reduced pursuant to this Section 6.1, and the
Gross-Up Payment shall be made to Employee. Employer's obligation to make
Gross-Up Payments under this Section 6.1 shall not be conditioned upon
Employee's Termination of Employment.
6.2 Subject to the provisions of Section 6.3, all determinations required
to be made under this Article 6, including whether and when a Gross-Up Payment
is required, the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers, or if such firm is unwilling to act in such capacity,
such other nationally recognized certified public accounting firm as may be
mutually agreed upon by Employee and Employer (the "Accounting Firm"). The
Accounting Firm shall provide detailed supporting calculations both to Employer
and Employee within fifteen (15) business days of the receipt of notice from
Employee that there has been a Payment or such earlier time as is requested by
Employer. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change of control, at
Employee's request Employee and Employer shall mutually agree upon 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 Employer. Any Gross-Up Payment, as determined pursuant to this
Article 6, shall be paid by Employer to or on behalf of Employee within five
(5) business days of the receipt of the Accounting Firm's determination,
provided that no such payment shall be due under this Article 6 before five (5)
days prior to the date the related payments of Taxes are required to be paid by
Employee to the applicable taxing authority. Any determination by the
Accounting Firm shall be binding upon Employer and Employee, absent manifest
error. As a result of the uncertainty in the application of Sections 280G and
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 Employer should have been made (the "Underpayment"), consistent with
the calculations required to be made hereunder. In the event Employer exhausts
its remedies pursuant to Section 6.3 and Employee thereafter is required to
make a payment of any additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by Employer to or for the benefit of
Employee.
6.3 Employee shall notify Employer in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by Employer of
the Gross-Up Payment. Such notification shall be given as soon as practicable,
but no later than ten (10) business days after Employee is informed of such
claim. Employee shall apprise Employer of the nature of such claim and, if
applicable, the date on which such claim is requested to be paid. Employee
shall not pay such claim prior to the expiration of the thirty (30) calendar
day period following the date on which Employee gives such notice to Employer
(or such shorter period ending on
14
the date that any payment of Taxes with respect to such claim is due). If
Employer notifies Employee in writing prior to the expiration of such period
that Employer desires to contest such claim (or if Employee pays the related
Taxes within such shorter period and Employer requests, within such thirty
(30)-day period, that Employee claim a refund of some or all of such Taxes),
then Employee shall:
(i) give Employer any information reasonably requested by Employer relating
to such claim;
(ii) take such action in connection with contesting such claim or claiming
such refund as Employer shall reasonably request in writing from time
to time, including accepting legal representation with respect to such
claim by an attorney reasonably selected by Employer;
(iii) cooperate with Employer in good faith in order effectively to contest
such claim or pursue such refund, and
(iv) permit Employer to participate in any proceedings relating to such
claim;
provided, however, that Employer shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest or refund claim (including, but only to the extent reasonably
incurred, costs and expenses incurred by Employee), and shall indemnify and
hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties) imposed as a result of such representation
and payment of costs and expenses. Without limitation on the foregoing
provisions of this Section 6.3, Employer shall control all proceedings taken in
connection with such contest, and, at its sole discretion, may pursue or forgo
any and all administrative appeals, proceedings, hearings and conferences with
the applicable taxing authority in respect of such claim and may, at its sole
discretion, either direct Employee to pay the tax claimed and xxx for a refund
or contest the claim in any permissible manner, and Employee agrees to
prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as
Employer shall determine; provided, however, that, if Employer directs Employee
to pay such claim and xxx for a refund, Employer shall advance the amount of
such payment to Employee, on an interest-free basis, and shall indemnify and
hold Employee harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties) imposed with respect to such advance or
with respect to any imputed income in connection with such advance; and
provided, further, that any extension of the statute of limitations relating to
payment of Taxes for the taxable year of Employee with respect to which such
contested amount is claimed to be due (other than any such extension arising by
operation of law) is limited solely to such contested amount. Furthermore,
Employer's control of the contest shall be limited to issues with respect to
which the Gross-Up Payment would be payable hereunder, and Employee shall be
entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
6.4 If, after the receipt by Employee of a Gross-Up Payment or an amount
advanced by Employer pursuant to 6.4 Section 6.3, Employee becomes entitled to
receive any refund with
15
respect to the Excise Tax to which such Gross-Up Payment relates or with
respect to such claim, Employee shall (subject to Employer complying in all
material respects with the requirements of Section 6.3, if applicable) promptly
pay to Employer the amount of such refund (together with any interest paid or
credited thereon after Taxes applicable thereto), less any Taxes required to be
paid by Employee with respect to the receipt thereof. If, after the receipt by
Employee of an amount advanced by Employer pursuant to Section 6.3, a
determination is made that Employee shall not be entitled to any refund with
respect to such claim and Employer does not notify Employee in writing of its
intent to contest such denial of refund prior to the expiration of thirty (30)
calendar 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 be
offset, to the extent thereof, against the amount of Gross-Up Payment required
to be paid. Employer may request that Employee pursue a refund of any Gross-Up
Payment paid under this Article 6, and in such case the provisions of Section
6.3 and this Section 6.4 shall govern the pursuit of such refund.
6.5 Notwithstanding any other provision of this Article 6, Employer may, in
its sole discretion, withhold and pay over to the Internal Revenue Service or
any other applicable taxing authority, for the benefit of Employee, all or any
portion of any Gross-Up Payment, and Employee hereby consents to such
withholding.
6.6 For purposes of this Article 6, the following definitions will apply:
(i) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(ii) "Excise Tax" means the excise tax imposed by Section 4999 of the Code,
together with any interest or penalties imposed with respect to such
excise tax.
(iii) "Parachute Value" of a Payment shall mean the portion of such Payment,
if any, that constitutes a "parachute payment" under Section 280G(b)(2)
of the Code, to the extent taken into account (including any discount
to the present value as of the date of the change of control for
purposes of Section 280G of the Code) in determining whether and to
what extent the Excise Tax will apply to such Payment, as determined by
the Accounting Firm.
(iv) "Payment" shall mean any payment or distribution by or on behalf of
Employer or its affiliates in the nature of compensation (within the
meaning of Section 280G(b)(2) of the Code) to or for the benefit of
Employee, whether paid or payable pursuant to this Agreement or
otherwise, other than the Gross-Up Payment.
(v) "Safe Harbor Amount" means 2.99 times Employee's "base amount," within
the meaning of Section 280G(b)(3) of the Code.
(vi) "Taxes" means the incremental United States federal, state and local
income, excise and other taxes payable by Employee with respect to any
applicable item of income. The amount of any tax, interest or penalty
shall (a) be reduced to take
16
into account the deductibility of such item for purposes of any other
tax, and (b) include any interest and penalties with respect to such
tax other than interest or penalties arising from Employee's failure to
pay such tax on a timely basis following payment thereof by Employer to
Employee in accordance with this Agreement, or from Employee's failure
to comply with the terms of this Agreement.
(vii) "Value" of a Payment shall mean the economic present value of a Payment
as of the date of the change of control for purposes of Section 280G of
the Code, as determined by the Accounting Firm using the discount rate
required by Section 280G(d)(4) of the Code.
ARTICLE 7: MISCELLANEOUS:
7.1 For purposes of this Agreement, the terms "affiliate" or "affiliated"
mean an entity or entities in which a Principal DEG Entity has a 20% or more
direct or indirect equity interest or entity or entities that have a 20% or
more direct or indirect equity interest in a Principal DEG Entity.
7.2 For purposes of this Agreement, the term "Change of Control" means any
one or more of the following events: (i) any person (as such term is used in
Rule 13d-5 under the Securities Exchange Act of 1934 (the "Exchange Act")) or
group (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Exchange
Act), other than DEG or its affiliates, or a subsidiary or employee benefit
plan (or any related trust) of Employer, becomes, directly or indirectly, the
beneficial owner of (A) 50% or more of the common stock of a Principal DEG
Entity or (B) securities of a Principal DEG Entity entitled to vote generally
in the election of directors of such Principal DEG Entity ("Voting Securities")
representing 50% or more of the combined voting power of all Voting Securities
of such Principal DEG Entity; (ii) if the persons who were shareholders of
Dresser, Ltd. as of the Effective Date ("Existing Shareholders") directly or
indirectly own less than 33% of the Voting Securities of a Principal DEG Entity
and there is another beneficial owner of a greater percentage of the Voting
Securities of such Principal DEG Entity than the Existing Shareholders as a
group; (iii) if Dresser, Ltd. (or any successor to all or substantially all of
its assets) owns, directly or indirectly, less than 66-2/3% of the Voting
Securities of Employer (or any successor to all or substantially all of its
assets) and each other current or future company then in the chain of ownership
between Dresser, Ltd. and Employer (including, without limitation, DHL and DHI
from the Agreement Date until they cease to be in such chain of ownership),
other than as a result of a merger or consolidation of Employer, DHL, or DHI
(or their successors) with and into Dresser, Ltd., DHL, or DHI (or their
successors) or the downstream merger or liquidation of Dresser, Ltd. as a
result of tax restructuring as a result of which (in the case of each of a
merger, consolidation, downstream merger or liquidation) the holding company
structure is eliminated, and in each case which do not otherwise constitute a
Change of Control; (iv) individuals who, as of the Agreement Date, constitute
the Board of a Principal DEG Entity (the "Incumbent Directors") cease for any
reason to constitute at least 75% of the members of the Board; provided that
any individual who becomes a director after the Agreement Date whose
17
election or nomination for election by Employer's shareholders was approved by
at least 75% of the members of the Incumbent Directors or who was elected by
the shareholders at a time when the First Reserve Funds and Odyssey Investment
Partners directly or indirectly own more than 75% of the Voting Securities of a
Principal DEG Entity (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or
threatened "election contest" relating to the election of the directors of a
Principal DEG Entity (as such terms are used in Rule 14a-11 under the Exchange
Act), "tender offer" (as such term is used in Section 14(d) of the Exchange
Act) or a proposed Merger (as defined below)) shall be deemed to be a member of
the Incumbent Board; (v) approval by the stockholders of a Principal DEG Entity
of either of the following: (A) a merger, reorganization, consolidation or
similar transaction (any of the foregoing, a "Merger") as a result of which the
individuals and entities who were the respective beneficial owners of the
outstanding common stock and Voting Securities of a Principal DEG Entity
immediately before such Merger are not expected to beneficially own,
immediately after such Merger, directly or indirectly, more than 60% of,
respectively, the common stock and the combined voting power of the Voting
Securities of the corporation resulting from such Merger in substantially the
same proportions as immediately before such Merger, or (B) a plan of
liquidation of a Principal DEG Entity or a plan or agreement for the sale or
other disposition of all or substantially all of the assets of Employer other
than any such sale or other disposition to a Subsequent Employer; or (vi) any
other transaction, event, or circumstance, regardless of form (collectively
"Transaction"), which results in control over the strategic and operational
decisions of a Principal DEG Entity by a board of directors, committee, or
group other than the Board or some subcomponent thereof (collectively, the "New
Board"); provided however, that such Transaction referenced in (vi) and not
also referenced in (i), (ii), (iii), (iv) or (v) shall not be deemed to result
in a Change of Control if Employee reports to and is a member of the New Board,
and remains President and (if after December 31, 2004) Chief Executive Officer
of Employer. Notwithstanding the foregoing, Employer may request and Employee
may in his sole discretion accept that any transaction or series of transaction
not be considered to be a Change of Control hereunder.
7.3 For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly
given when received by or tendered to Employee or Employer, as applicable, by
pre-paid courier or by United States registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to Employer: Dresser, Ltd. 00000 Xxxxxx Xxxxxxx, Xxxxx 0000, Xxxxxxx,
XX 00000, (or Dresser's current headquarters address) to the
attention of the Vice-President & General Counsel.
With a copy to: Xxxxxxx Xxxxxxxx, care of First Reserve Corporation at its most
recent business address.
If to\Employee: To his last known personal residence
18
With a copy to: Xxxxx X. Xxxxx, Esq.
8000 Sears Tower
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
7.4 This Agreement shall be governed by and construed and enforced, in all
respects in accordance with the law of the State of Delaware, without regard to
principles of conflicts of law, unless preempted by federal law, in which case
federal law shall govern; provided, however, that either Employer's Dispute
Resolution Plan, or the rules of the American Arbitration Association, as
elected by Employee, shall govern in all respects with regard to the resolution
of disputes hereunder as provided in Section 7.7.
7.5 No failure by either party hereto at any time to give notice of any
breach by the other party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
7.6 It is a desire and intent of the parties that the terms, provisions,
covenants, and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant, or
remedy of this Agreement or the application thereof to any person, association,
or entity or circumstances shall, to any extent, be construed to be invalid or
unenforceable in whole or in part, then such term, provision, covenant, or
remedy shall be construed in a manner so as to permit its enforceability under
the applicable law to the fullest extent permitted by law. In any case, the
remaining provisions of this Agreement or the application thereof to any
person, association, or entity or circumstances other than those to which they
have been held invalid or unenforceable, shall remain in full force and effect.
7.7 It is the mutual intention of the parties to have any dispute
concerning this Agreement resolved out of court. Accordingly, the parties agree
that any such dispute shall, as the sole and exclusive remedy, be submitted for
resolution either through Employer's Dispute Resolution Plan or pursuant to
binding arbitration to be held in Dallas, Texas, under the rules of the
American Arbitration Association concerning Commercial Arbitration, as elected
by Employee; provided, however, that Employer, on its own behalf and on behalf
of any of the other Dresser Entities, shall be entitled to seek a restraining
order or injunction in any court of competent jurisdiction to prevent any
breach or the continuation of any breach of the provisions of Article 4 and
Employee hereby consents that such restraining order or injunction may be
granted without the necessity of Employer posting any bond. The parties agree
that the resolution of any dispute concerning this Agreement through any of the
means set forth in this Section 7.7 shall be final and binding.
7.8 This Agreement shall be binding upon and inure to the benefit of
Employer, its successors in interest, or any other person, association, or
entity which may hereafter acquire or succeed to all or substantially all of
the business assets of Employer by any means, whether indirectly or directly,
and whether by purchase, merger, consolidation, or otherwise. Employee's rights
and obligations under this Agreement are personal and such rights, benefits,
19
and obligations of Employee shall not be voluntarily or involuntarily assigned,
alienated, or transferred, whether by operation of law or otherwise, without
the prior written consent of Employer, other than in the case of death or
permanent disability of Employee.
7.9 This Agreement including the option grants as set forth in Exhibit A
replaces and merges any previous agreements and discussions pertaining to the
subject matter covered herein. This Agreement including the option grants as
set forth in Exhibit A constitutes the entire agreement of the parties with
regard to the terms of Employee's employment, termination of employment and
severance benefits, and contains all of the covenants, promises,
representations, warranties, and agreements between the parties with respect to
such matters. Each party to this Agreement acknowledges that option plan
participation is handled in separate agreements and that no representation,
inducement, promise, or agreement, oral or written, has been made by either
party with respect to the foregoing matters which is not embodied herein other
than Exhibit A hereto and the option grants contemplated by Exhibit A, and that
no agreement, statement, or promise relating to the employment of Employee by
Employer that is not contained in this Agreement shall be valid or binding. Any
modification of this Agreement will be effective only if it is in writing and
signed by each party whose rights hereunder are affected thereby.
7.10 Employer will maintain directors' and officers' liability insurance
for Employee while employed, and for a five (5) year period following
termination of employment at a level equivalent to the most favorable and
protective coverage for any active officer or director of Employer.
7.11 Employer agrees to indemnify Employee for any job-related liability to
the fullest extent permitted under Employer's by-laws and other applicable
indemnification agreements.
7.12 Employer will pay Employee's legal fees and legal expenses in
connection with the negotiation, drafting, implementation, interpretation, and
enforcement of this Agreement.
[intentionally blank - signatures follow]
20
IN WITNESS WHEREOF, Employer and Employee have duly executed this Agreement
in multiple originals to be effective on the Agreement Date.
DRESSER, INC.
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
EMPLOYEE
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
21
DRESSER LETTERHEAD
October 8, 2002
Mr. Xxxxxx Xxxx
0000 Xxxxx Xxxx
Xxxxxxxxxx, XX 00000
Re: Option Grants and Shareholder Issues
Dear Xxxxx:
You are executing an Amended and Restated Employment Agreement effective
October 8, 2002 with Dresser. Normally, you would also be executing an option
agreement and receive option grants in connection therewith. Due to the
internal review of our option plans and grants we have agreed to delay the
execution of your option documents until a later date. This letter (which
amends and restates the letter executed as of the same date) will serve as
confirmation that the Executive Committee of the Board has approved option
grants to you on the same terms as the sample documents attached hereto, on the
terms set forth below and with the exception of the following:
1. Grant of option on 224,000 shares of Dresser Common Stock at an exercise
price of $40.00 per share, split between performance and time vested
options as approved by the Board and agreed to by you (with an
anticipated split of 40% time and 60% performance (xxxxx xxxx at 7 or 9
years). Time options to vest 10% 11/04/03, 10% 11/04/04, 20% 12/31/04,
20% 11/04/05, 20% 11/04/06 and 20% 11/04/07.
2. The change of control definition in Section 7.2 of your employment
agreement will replace and govern the change of control definition in
Section 12 of the 2001 Stock Incentive Plan.
3. Unvested options will terminate without value upon your termination "for
Employer Cause" or resignation without "Employee Cause" (as such terms
are defined in your Employment Agreement). Unvested Options will
immediately vest upon any termination other than "for Employer Cause".
Notwithstanding the Plan, Employer Cause, Employee Cause and disability
shall all be determined in the manner set forth in your Employment
Agreement.
4. Vested options will expire if unexercised on the first anniversary of
termination.
5. The Company shall have the right, but not the obligation to call "Vested
Stock Rights" generally using procedures set forth in Section 4.2 of the
Investor Rights Agreement on the week before the anniversary of your
termination of employment at the Repurchase Price established at such
time pursuant to Sections 4.3, 4.4 and 4.5 of Investor Rights Agreement.
Employee will have the right, but not the obligation to put "Vested
Stock Rights" to the Company at the Repurchase Price established at such
time pursuant to Section 4.4 and 4.5 of the Investor Rights Agreement
for 9 months after your termination; provided that you will work with
the Company's accounting advisors within ten days hereof regarding
this put right to make mutually acceptable changes to this right. All
payments in connection with a put or a call shall be made in a lump sum
in cash in immediately available funds within ninety days after the date
of exercise of such put or call, subject to legal restrictions or
restrictions pursuant to financing arrangements; provided, that in the
event that any such restriction, such payments will be made as soon as
possible and to the extent permitted by such restrictions.
6. The Plan will not be amended or interpreted, and no rule or regulation
thereunder will be adopted, with respect or applicable to the options
referred to in this letter, which amendment, interpretation, rule or
regulation is inconsistent with this letter or the Employment Agreement
in a manner which is materially adverse to you, giving effect to any
arrangements the Company may make with you in connection with such event
We understand that receipt of this letter is a material inducement to your
willingness to enter into your Employment Agreement and that you are relying on
the promises made herein to your detriment. This letter will have no further
force and effect when the forgoing terms have been captured in definitive
option agreements and related documents signed by the parties or adopted by the
Board of Directors of Company.
You similarly must understand that our willingness to enter into the Employment
Agreement is conditioned upon the acceptability of the forgoing to you and that
after reviewing the form documents you have no other concerns or issues with
such arrangements.
If you find the terms of this letter acceptable and otherwise in accordance
with our discussions, please sign the acknowledgement below and return a copy
to me by fax.
We are very excited that you have agreed to join the Dresser team and we look
forward to your significant contributions as a key member of our executive
management team.
Sincerely,
/s/ Xxxxxxx Xxxxxx
Xxxxxxx Xxxxxx
Chief Executive Officer
CC: Xxxxxxx Xxxxxxxx, Chairman
Xxxx Xxxxxxx, Director
