EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated effective as of
January 1, 2002, by and among National-Oilwell L.P., a Delaware limited
partnership (the "Company"), National-Oilwell, Inc., a Delaware
corporation ("NOI"), and Xxxxxxx X. Xxxxxx, Xx. (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of NOI (the "Board") has previously
determined that it is in the best interests of NOI and its stockholders to
retain the Executive and to induce the employment of the Executive for the long
term benefit of NOI, its shareholders and its affiliated companies, including
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 affiliated company subject to the
terms and conditions of this Agreement, during the Employment Period (as defined
below). As used in this Agreement, the term "affiliated companies" shall include
any company controlled by, controlling or under common control with the Company.
(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 year(s) after such Renewal Date, unless at least sixty (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.
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(i) During the Employment Period, (A) the Executive's position (including
status, offices, titles and reporting requirements, authority, duties and
responsibilities) shall be President and Chief Executive Officer and (B)
the Executive's services shall be performed at the location where the
Executive was employed immediately preceding the date hereof or any office
or location less than fifty (50) miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote the Executive's full time, skill and attention to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best 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) serve on corporate,
civic or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. 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 equal to the current base salary being received by
the Executive ("Annual Base Salary"), which shall be paid in accordance
with the Company's standard payroll practice. During the Employment
Period, the Annual Base Salary shall be reviewed no more than twelve (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 increase without the express
written consent of the Executive. 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 then
current National Oilwell Incentive Plan (or such other name as may be
adopted for the plan or its successor). 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.
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(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
stock option, 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 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.
(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 which 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 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.
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 a 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
11(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 thirty (30) days after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that within the thirty
(30) day period after such receipt, the Executive shall not
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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 on a full-time basis for one hundred eighty
(180) calendar days as a result of incapacity due to mental or physical illness
which 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 which 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 which 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 reasonable detail.
(c) Good Reason. The Executive may terminate the Executive's employment
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), authority, duties or responsibilities as
contemplated by Section 2(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose an isolated, insubstantial
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and inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(ii) 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 which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than as provided in Section 2(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the date
hereof;
(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.
(vi) notice by the Company to the Executive that the Company is not
extending or renewing 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 11(b) of the Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (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 the Company to set forth in the Notice of
Termination any fact or circumstance which 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;
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(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
thirty (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 and (II) the
Annual Bonus paid or payable, including any bonus or portion thereof
which 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
(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"), any other excess or supplemental
retirement plan in which the Executive participates or any other
deferred compensation plan during the twelve (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.
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Provided that, notwithstanding anything contained herein to the contrary,
for that portion of the Accrued Obligations consisting of compensation
previously deferred by the Executive under a plan sponsored by the Company
(together with any accrued interest or earnings thereon), the Executive shall
have the option, at Executive's sole discretion, to receive any payments due
from such plan in accordance with the terms of the plan or in cash within thirty
(30) days after the Date of Termination as provided in this Section 4(a)(i), so
long as the election to receive cash under this Section is permitted under all
applicable regulations governing payouts from the plan and does not have an
adverse effect on the plan or the remaining participants in the plan.
(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 which 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 (for
purpose of determining eligibility of the Executive for retiree benefits
pursuant to such plans, programs, and arrangements, the Executive shall be
considered to have remained employed until three years after the Date of
Termination and to have retired on the last day of such period);
(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 sixty (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 to 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 sixty (60)
day period prior to and including the Executive's Date of Termination.
Such cash payments shall be made within thirty (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 which is six
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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).
Any options outstanding as of the Date of Termination 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 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
shorter; any restrictions imposed by NOI or the Company that are
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
which 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 401(k) Savings Plan and any other
similar plans, including any 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 which 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 paid to the
Executive's estate or beneficiaries, as applicable, in a lump sum in cash within
thirty (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
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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
thirty (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 thirty
(30) days after the Date of Termination subject to such other options or
restrictions as provided by law.
5. OTHER RIGHTS.
Except as provided herein, 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 herein, amounts which are vested benefits or which 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
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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 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.
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 which 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 which 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. Notwithstanding the foregoing provisions of this
Section 7(a), if it shall be
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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 Ernst & Young,
L.L.P., 0000 XxXxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 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 fifteen (15) business
days after the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group affecting a change of control of the Company, 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 which 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 thirty (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:
Page 11
(i) give the Company any information reasonably requested by the
Company relating to such claim;
(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 in order 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.
Page 12
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,
which 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 which is or shall become part of the public
domain (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 which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
10. POST EMPLOYMENT NON-COMPETITION OBLIGATIONS.
(a) As part of the consideration for the compensation and benefits to be
paid to Executive hereunder, and as an additional incentive for the Company and
NOI to enter into this Agreement, the Company, NOI and Executive agree to the
non-competition provisions of this Section 10. Executive agrees that during the
period of Executive's non-competition obligations hereunder, Executive will not,
directly or indirectly for Executive or for others, in any geographic area or
market where the Company, NOI or any of their subsidiaries or affiliated
companies are conducting any business as of the date of termination of the
employment relationship or have during the previous twelve months conducted any
business:
Page 13
(i) engage in any business competitive with any line of business
conducted by the Company, NOI, or any of their subsidiaries or
affiliates;
(ii) render advice or services to, or otherwise assist, any other person,
association, or entity who is engaged, directly or indirectly, in
any business competitive with any line of business conducted by the
Company, NOI, or any of their subsidiaries or affiliates;
(iii) induce any officer or manager of the Company or NOI, or any of their
subsidiaries or affiliates to terminate his or her employment with
the Company, NOI, or any of their subsidiaries or affiliates, or
hire or assist in the hiring of any such officer or manager by
person, association, or entity not affiliated with the Company, NOI
or any of their subsidiaries or affiliates.
These non-competition obligations shall apply during Executive's employment and
for a period ending on the third (3rd) anniversary date of the Date of
Termination. After termination of Executive's employment these non-competition
obligations shall apply only to businesses having annual revenues in excess of
$20 million competitive with any line of business conducted by the Company, NOI,
or any of their subsidiaries having annual revenues in excess of $20 million for
the last fiscal year prior to the time of termination. If the Company, NOI, or
any of their subsidiaries or affiliates abandons a particular aspect of its
business, that is, ceases such aspect of its business with the intention to
permanently refrain from such aspect of its business, then this post-employment
non-competition covenant shall not apply to such former aspect of that business.
(b) Executive understands that the foregoing restrictions may limit his
ability to engage in certain businesses anywhere in the world during the period
provided for above, but acknowledges that Executive will receive sufficiently
high remuneration and other benefits under this Agreement to justify such
restriction. Executive acknowledges that money damages would not be sufficient
remedy for any breach of this Section 10 by Executive, and the Company, NOI, or
any of their subsidiaries or affiliates shall be entitled to specific
performance and injunctive relief as remedies for such breach or any threatened
breach after notification by the Company of any breach and Executive's failure
to cure same. Such remedies shall not be deemed the exclusive remedies for a
breach of this Section 10, but shall be in addition to all remedies available at
law or in equity to the Company, NOI, or any of their subsidiaries or
affiliates, including, without limitation, the recovery of damages from
Executive and his agents involved in such breach.
(c) The Executive, the Company and NOI each expressly acknowledge and
agree that the restrictions contained in this Agreement, including this Section
10, are deemed by each to reasonable and necessary to protect the business
interests of NOI and the Company and their subsidiaries and affiliates. However,
in the event that any of the restrictions contained in this Agreement, and
specifically this Section 10, are found by a court of competent jurisdiction to
be unreasonable, or overly broad as to geographic area or time, or otherwise
unenforceable, it is the parties express intention for the restrictions herein
set forth to be modified by such court so as to be reasonable and enforceable
and, as so modified by the court, to be fully enforced.
Page 14
11. MISCELLANEOUS.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORD-ANCE 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:
If to Executive: If to Company:
Xxxxxxx X. Xxxxxx, Xx. Xxxxxxxx-Xxxxxxx, X.X.
0000 Xxxxxx X.X. Xxx 0000
Xxxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxx 00000-0000
Attn: Chief Financial Officer
With copy to:
National-Oilwell, Inc.
00000 Xxxxxxxx Xxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: General Counsel
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)-(vi) 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.
Page 15
(f) The Company and the Executive are parties to an employment agreement
dated as of February 5, 1996 (the "Prior Employment Agreement"). Upon full
execution and delivery of this Agreement, the parties agree that the Prior
Employment Agreement shall be cancelled and of no further force or effect.
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.
Executive National-Oilwell, L.P.
by its general partner
NOW Oilfield Services, Inc.
_________________________
Xxxxxxx X. Xxxxxx, Xx.
By: __________________________
Name:_________________________
Title:________________________
National-Oilwell, Inc.
By: __________________________
Name:_________________________
Title:________________________
Page 16
