EMPLOYMENT AGREEMENT
Exhibit 10.3
This Employment Agreement (this “Agreement”) is made and entered into by and between ION
Geophysical Corporation, a Delaware corporation (hereinafter referred to as “Employer”), and Xxxxx
X. Xxxxxx (hereinafter referred to as “Employee”), effective as of December 1, 2008 (the “Effective
Date”).
WHEREAS, Employee desires to be employed by Employer, and Employer desires to employ Employee,
subject to the terms set out in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Employer and Employee agree as follows:
Section 1. General Duties of Employer and Employee.
(a) Employer agrees to employ Employee, and Employee agrees to accept employment by Employer
and to serve Employer, in an executive capacity as its President and Chief Operating Officer.
Employee will report to the Chief Executive Officer of Employer. The powers, duties and
responsibilities of Employee as President and Chief Operating Officer include those duties that are
the usual and customary powers, duties and responsibilities of such office, including those powers,
duties and responsibilities specified in Employer’s Bylaws, and such other and further duties
appropriate to such position as may from time to time be assigned to Employee by the Chief
Executive Officer or the Board of Directors of Employer (the “Board”).
(b) While employed hereunder, Employee will devote substantially all reasonable and necessary
time, efforts, skills and attention for the benefit of and with Employee’s primary attention to the
affairs of Employer in order that he may faithfully perform his duties and obligations. The
preceding sentence will not, however, be deemed to restrict Employee from attending to matters or
engaging in activities not directly related to the business of Employer, provided that (i) such
activities or matters are reasonable in scope and time commitment and not otherwise in violation of
this Agreement, and (ii) Employee will not become a director or officer of (or hold any
substantially similar responsibility with) any corporation or other entity (excluding charitable or
other non-profit organizations) without prior written disclosure to, and consent of, Employer.
(c) At the commencement of Employee’s employment by Employer, Employee will be based at
Employer’s corporate headquarters located at 0000 XxxxXxxx Xxxx., Xxxxxxx, Xxxxx 00000 (the “Place
of Employment”).
(d) Employee agrees and acknowledges that as an officer and employee of Employer, and
consistent with the terms hereof, he owes a fiduciary duty of loyalty, fidelity and allegiance to
act at all times in the best interests of Employer and to do no act knowingly which would injure
Employer’s business, its interests or its reputation.
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Section 2. Compensation and Benefits.
(a) Employer will pay to Employee during the term of this Agreement a base salary at the rate
of $385,000 per annum (such base salary as adjusted from time to time by the Compensation Committee
of the Board as hereinafter provided is referred to herein as the “Base Salary”). The Compensation
Committee of the Board will review the Base Salary from time to time and, during the term of this
Agreement, may increase, but may not decrease, the Base Salary as it deems to be in the best
interest of Employer. The Base Salary will be paid to Employee in equal installments consistent
with the payroll schedule Employer establishes from time to time for its management personnel.
(b) Employee will be eligible to participate in Employer’s incentive compensation plan for the
fiscal year 2008, with target plan incentive compensation at 50% of Base Salary and with an
opportunity to earn plan incentive compensation up to 100% of Base Salary. During each subsequent
fiscal year during the term of this Agreement, Employee will be eligible to participate in that
year’s incentive compensation plan or other replacement incentive or bonus plan Employer
establishes for its key executives. Any incentive compensation pay or bonus so determined under any
such plan will be paid to Employee not later than March 15 of the year immediately following the
year with respect to which such bonus is based upon, calculated or determined.
(c) In 2010, Employee shall be entitled to receive a grant of the number of shares of
restricted common stock of Employer determined by dividing (a) the amount of the annual Incentive
Plan Bonus, if any, earned by Employee for fiscal year 2009 by (b) the average of the closing sales
price per share on the New York Stock Exchange of Employer’s shares of common stock for the ten
(10) business days ending on and including the last full trading day on which shares of Employer’s
common stock are traded on the New York Stock Exchange (the “Final 10-Day Average Price”) in 2009.
This restricted stock award will provide for vesting of all of the shares of restricted stock on
the date that is the third anniversary date of the date of grant of such award. The date of grant
of this award will be the first available grant date (under the then-existing policies of Employer
relating to determination of grant dates for restricted stock awards) after the determination of
the amount of the Incentive Plan Bonus earned by Employee for fiscal year 2009. The remaining
terms and conditions of the restricted stock award will be governed by the applicable restricted
stock agreement and the terms and conditions of Employer‘s 2004 Long-Term Incentive Plan or such
other stock plan as shall be determined by Employer (the “Plan”).
(d) In each calendar year after 2010 during the Term of this Agreement, Employee shall be
entitled to receive grant(s) of the number of shares of restricted common stock of Employer
determined pursuant to this Section 2(d), in each case pursuant to the terms and conditions of the
Plan. The number of shares with respect to the restricted stock awards to Employee after 2010 will
be determined by dividing (a) the amount of the annual Incentive Plan Bonus, if any, earned by
Employee for the preceding year by (b) the Final 10-Day Average Price for the preceding year. This
restricted stock award will provide for vesting of all of the shares of restricted stock on the
date that is the third anniversary date of the date of grant of such award. The date of grant of
this award will be the first available grant date (under the then-existing policies of Employer
relating to determination of grant dates for restricted stock awards) after the
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determination of the amount of the Incentive Plan Bonus earned by Employee for the preceding
year. The remaining terms and conditions of the restricted stock award will be governed by the
applicable restricted stock agreement and the terms and conditions of the Plan.
(e) Employee will be eligible for participation in equity compensation plans that are
established for senior management employees of Employer; such grants to be made in the sole
discretion of the Compensation Committee or the Board.
(f) Employee will accrue vacation pay of 6.154 hours per two-week pay period. Vacation may be
taken by Employee at the time and for such periods as may be mutually agreed upon between Employer
and Employee.
(g) Employee will be reimbursed in accordance with Employer’s normal expense reimbursement
policies for all of the actual and reasonable costs and expenses incurred by him in the performance
of his services and duties hereunder, including, but not limited to, reasonable travel expenses.
Employee will furnish Employer with all invoices and vouchers reflecting amounts for which Employee
seeks Employer’s reimbursement. The amount of any such reimbursement shall be payable to Employee
in accordance with Employer’s normal expense reimbursement policies. Notwithstanding the foregoing
or any provision contained in this Agreement to the contrary, (i) if any reimbursements under this
Section 2(g) are taxable to Employee, such reimbursements shall be made no later than the end of
the calendar year following the year the expense was incurred, and (ii) the amount of
reimbursements made with respect to one calendar year shall not affect the amount of reimbursements
to be made hereunder for subsequent calendar years
(h) Employee will be entitled to participate in all insurance and retirement plans, incentive
compensation plans (at a level appropriate to his position) and such other benefit plans or
programs as may be in effect from time to time for the employees of Employer, including, without
limitation, those related to savings and thrift, retirement, welfare, medical, dental, disability,
salary continuance, accidental death, travel accident, life insurance, incentive bonus, membership
in business and professional organizations, and reimbursement of business and entertainment
expenses.
(i) Employer, during the term of this Agreement and thereafter without limit of time, will
indemnify Employee for claims and expenses to the extent provided in Employer’s Certificate of
Incorporation and Bylaws. Employer will also provide Employee coverage under Employer’s policy or
policies of directors’ and officers’ liability insurance to the same extent as other executive
officers of Employer during the term of this Agreement.
(j) All Base Salary, bonus and other payments made by Employer to Employee pursuant to this
Agreement will be subject to such payroll and withholding deductions as may be required by law and
other deductions applied generally to employees of Employer for insurance and other employee
benefit plans in which Employee participates.
Section 3. Fiduciary Duty; Confidentiality.
(a) In keeping with Employee’s fiduciary duties to Employer, Employee agrees that he will not
knowingly take any action that would create a conflict of interest with
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Employer, or upon discovery thereof, allow such a conflict to continue. In the event that
Employee discovers that such a conflict exists, Employee agrees that he will disclose to the Board
any facts which might involve a conflict of interest that has not been approved by the Board.
(b) As part of Employee’s fiduciary duties to Employer, Employee agrees to protect and
safeguard Employer’s information, ideas, concepts, improvements, discoveries, and inventions and
any proprietary, confidential and other information relating to Employer or its business
(collectively, “Confidential Information”) and, except as may be required by Employer, Employee
will not knowingly, either during his employment by Employer or thereafter, directly or
indirectly, use for his own benefit or for the benefit of another, or disclose to another, any
Confidential Information, except (i) with the prior written consent of Employer; (ii) in the course
of the proper performance of Employee’s duties under this Agreement; (iii) for information that
becomes generally available to the public other than as a result of the unauthorized disclosure by
Employee; (iv) for information that becomes available to Employee on a non-confidential basis from
a source other than Employer or its affiliated companies who is not bound by a duty of
confidentiality to Employer; or (v) as may be required by any applicable law, rule, regulation or
order.
(c) Upon termination of his employment with Employer, Employee will immediately deliver to
Employer all documents in Employee’s possession or under his control which embody any of Employer’s
Confidential Information.
(d) In addition to the foregoing provisions of this Section 3, and effective as of the
Effective Date, Employee reaffirms the duties imposed upon Employee by that certain Employee
Proprietary Information Agreement (or similar agreement) by and between Employer and Employee
signed in conjunction with Employee’s commencement of employment.
(e) Employee will comply with Employer’s Code of Ethics, and any amendments or replacement
policies adopted by the Board (the “Code of Ethics”).
Section 4. Term of Agreement.
The term of this Agreement will commence effective as of the Effective Date, and, subject to
the terms and conditions hereof and except as may be affected by a Change in Control, will continue
for a three-year period ending on November 30, 2011 (the “Initial Term”), and thereafter the term
will be automatically extended for successive periods of two years unless prior to the end of the
original three-year period (or, if applicable, any such successive two-year period), Employer gives
Employee at least ninety (90) days prior written notice that Employer has decided not to extend the
term of this Agreement. Notwithstanding any provision contained herein to the contrary, Employee
acknowledges that his employment with Employer is at will and that Employer may terminate his
employment at any time and for any reason or for no reason at the discretion of Employer, but
subject to any rights Employee has under Sections 5, 6, 7, 8 and 10 of this Agreement.
Section 5. Termination.
(a) Employee’s employment with Employer hereunder will terminate upon
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the first to occur of the following:
(1) The death or “Disability” (as defined in Section 5(b) hereof) of Employee;
(2) Employer terminates such employment for “Cause” (as defined in Section 5(c)
hereof);
(3) Employee terminates such employment for “Good Reason” (as defined in
Section 5(d) hereof);
(4) Employer terminates such employment for any reason other than Cause, or for
no reason at all; or
(5) Employee terminates such employment for any reason other than Good Reason,
or for no reason at all.
(b) As used in this Agreement, “Disability” means permanent and total disability (within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), or any
successor provision) which has existed for at least 180 consecutive days.
(c) As used in this Agreement, “Cause” means:
(1) the willful and continued failure by Employee to substantially perform his
obligations under this Agreement (other than any such failure resulting from his
Disability) after a demand for substantial performance has been delivered to him by
the Board which specifically identifies the manner in which the Board believes
Employee has not substantially performed such provisions and Employee has failed to
remedy the situation within ten (10) days after such demand or a willful and
material violation of the Employer’s Code of Ethics;
(2) Employee’s willfully engaging in conduct materially and demonstrably
injurious to the property or business of Employer, including without limitation,
fraud, misappropriation of funds or other property of Employer, other willful
misconduct, gross negligence or conviction of a felony or any crime of moral
turpitude; or
(3) Employee’s material breach of this Agreement which breach has not been
remedied by Employee within ten (10) days after receipt by Employee of written
notice from Employer that he is in material breach of the Agreement, specifying the
particulars of such breach.
For purposes of this Agreement, no act, or failure to act, on the part of Employee shall be deemed
“willful” or engaged in “willfully” if it was due primarily to an error in judgment or negligence,
but shall be deemed “willful” or engaged in “willfully” only if done, or omitted to be done, by
Employee not in good faith and without reasonable belief that his action or omission was in the
best interest of Employer. Notwithstanding the foregoing, Employee shall not be
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deemed to have been terminated as a result of “Cause” hereunder unless and until there shall have
been delivered to Employee a copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the Board then in office at a meeting of the Board called and held for such
purpose (after reasonable notice to Employee and an opportunity for Employee, together with his
counsel, to be heard before the Board), finding that, in the good faith opinion of the Board of
Directors, Employee has committed an act set forth above in this Section 5(c) and specifying the
particulars thereof in detail. Nothing herein shall limit the right of Employee or his or her
legal representatives to contest the validity or propriety of any such determination.
(d) As used in this Agreement, “Good Reason” means:
(1) Employer’s failure to comply with any of the provisions of Section 2 of
this Agreement (including, but not limited to, such a failure resulting from any
reduction in the Base Salary), which failure is not remedied within ten (10) days
after receipt of written notice from Employee specifying the particulars of such
breach;
(2) Employer’s breach of any other material provision of this Agreement which
is not remedied within ten (10) days after receipt by Employer of written notice
from Employee specifying the particulars of such breach;
(3) the assignment to Employee of any duties materially inconsistent with
Employee’s position, duties, functions, responsibilities or authority as
contemplated by Section 1 of this Agreement;
(4) the relocation of Employee’s principal place of performance of his duties
and responsibilities under this Agreement to a location more than fifty miles (50)
miles from the Place of Employment;
(5) any failure by Employer to comply with Section 11(c);
(6) any purported termination of Employee’s employment by Employer which is not
effected pursuant to a Notice of Termination satisfying the requirements of Section
5(e) hereof (and for purposes of this Agreement, no such purported termination shall
be effective); or
(7) Employer elects not to extend the Initial Term or any subsequent term of
this Agreement under Section 4.
(e) Any termination by Employer or Employee of Employee’s employment with Employer shall be
communicated by written notice (a “Notice of Termination”) to the other party that shall:
(1) indicate the specific provision of this Agreement relied upon for such
termination;
(2) indicate the specific provision of this Agreement pursuant to which
Employee is to receive compensation and other benefits as a result of such
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termination; and
(3) otherwise comply with the provisions of this Section 5(e) and Section
13(a).
If a Notice of Termination states that Employee’s employment with Employer has been terminated as a
result of Employee’s Disability, the notice shall (i) specifically describe the basis for the
determination of Employee’s Disability, and (ii) state the date of the determination of Employee’s
Disability, which date shall be not more than ten (10) days before the date such notice is given.
If the notice is from Employer and states that Employee’s employment with Employer is terminated by
Employer as a result of the occurrence of Cause, the Notice of Termination shall specifically
describe the action or inaction of Employee that Employer believes constitutes Cause and shall be
accompanied by a copy of the resolution satisfying Section 5(c). If the Notice of Termination is
from Employee and states that Employee’s employment with Employer is terminated by Employee as a
result of the occurrence of Good Reason, the Notice of Termination shall specifically describe the
action or inaction of Employer that Employee believes constitutes Good Reason. Any purported
termination by Employer of Employee’s employment with Employer shall be ineffective unless such
termination shall have been communicated by Employer to Employee by a Notice of Termination that
meets the requirements of this Section 5(e) and the provisions of Section 13(a).
(f) As used in this Agreement, “Date of Termination” means:
(1) if Employee’s employment with Employer is terminated for Disability, sixty
(60) days after Notice of Termination is received by Employee or any later date
specified therein, provided that within such sixty (60) day period Employee shall
not have returned to full-time performance of Employee’s duties;
(2) if Employee’s employment with Employer is terminated as a result of
Employee’s death, the date of death of Employee;
(3) if Employee’s employment with Employer is terminated for Cause, the date
Notice of Termination, accompanied by a copy of the resolution satisfying Section
5(c), is received by Employee or any later date specified therein, provided that
Employer may, in its discretion, condition Employee’s continued employment upon such
considerations or requirements as may be reasonable under the circumstances and
place a reasonable limitation upon the time within which Employee will comply with
such considerations or requirements; or
(4) if Employee’s employment with Employer is terminated for any reason other
than Employee’s Disability, Employee’s death or Cause, or for no reason, the date
that is fourteen (14) days after the date of receipt of the Notice of Termination.
Section 6. Effect of Termination of Employment.
(a) Upon termination of Employee’s employment during the Initial Term, by
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Employer for Cause, or by Employee for no reason or any reason other than Good Reason, all
compensation and benefits will cease upon the Date of Termination other than: (i) those benefits
that are provided by retirement and benefit plans and programs specifically adopted and approved by
Employer for Employee that are earned and vested by the Date of Termination; (ii) as provided in
Section 10; (iii) Employee’s Base Salary through the Date of Termination; (iv) any incentive
compensation due Employee if, under the terms of the relevant incentive compensation arrangement,
such incentive compensation was due and payable to Employee on or before the Date of Termination;
and (v) medical and similar benefits the continuation of which is required by applicable law or
provided by the applicable benefit plan.
(b) Upon termination of Employee’s employment due to the death of Employee or upon termination
by Employer due to the Disability of Employee, all compensation and benefits will cease upon the
Date of Termination other than: (i) those benefits that are provided by retirement and benefit
plans and programs specifically adopted and approved by Employer for Employee that are earned and
vested by the Date of Termination; (ii) as provided in Section 10; (iii) Employee’s Base Salary
through the Date of Termination; (iv) any incentive compensation due Employee if, under the terms
of the relevant incentive compensation arrangement, such incentive compensation was due and payable
to Employee on or before the Date of Termination; and (v) medical and similar benefits the
continuation of which is required by applicable law or provided by the applicable benefit plan.
(c) If Employee’s employment with Employer is terminated (i) by Employer for no reason or for
any reason other than Cause or the death or Disability of Employee, or (ii) by Employee for Good
Reason, the obligations of Employer and Employee under Sections 1 and 2 will terminate as of the
Date of Termination and Employer will pay or provide to Employee the following:
(1) Employee’s Base Salary earned and payable through the Date of Termination;
(2) Any unpaid incentive compensation earned by Employee pursuant to the terms
of the relevant incentive compensation arrangement with respect to the year of the
Date of Termination. In the absence of any agreement to the contrary, such
incentive compensation amount shall be the pro rata amount due to Employee based on
payments that would have been due to Employee if Employee had remained employed by
Employer for the full fiscal year. Any such amount payable to Employee pursuant to
the foregoing shall be payable to Employee at such time that incentive compensation
for such year is paid to other recipients under the plan and shall be subject to the
terms or requirements of such incentive compensation as may be set forth in the plan
or established by the Board or Compensation Committee;
(3) an aggregate amount (the “Severance Payment”) equal to two-times the
Employee’s annual Base Salary at the highest annual rate in effect on or before the
Date of Termination (but prior to giving effect to any reduction therein which
precipitated such termination), which Severance Payment will be paid to Employee
over a two-year period in accordance with Employer’s normal payroll
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practices;
(4) if immediately prior to the Date of Termination, Employee (and, if
applicable, his spouse and/or dependents) was covered under Employer’s group
medical, dental, health and hospital plan in effect at such time, then Employer
shall provide to Employee for one (1) year after the Date of Termination, and
provided that Employee has timely elected under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (“COBRA”), to continue coverage under such
plan, Employer will, at no greater cost or expense to Employee than was the case
immediately prior to the Date of Termination, maintain such continued coverage in
full force and effect; and
(5) Employee’s vesting and exercise rights with regard to outstanding stock
options, restricted stock, performance shares and other equity grants shall be in
accordance with the applicable plan and award agreements.
Except as otherwise provided above and in Section 10, all other compensation and benefits will
cease upon the Date of Termination other than the following: (i) those benefits that are provided
by retirement and benefit plans and programs specifically adopted and approved by Employer for
Employee that are earned and vested by the Date of Termination; and (ii) medical and similar
benefits the continuation of which is required by applicable law or as provided by the applicable
benefit plan.
(d) Except for those payments and benefits required to be made as provided by law or pursuant
to the terms of a plan, the severance payments and benefits to be paid and provided to Employee
pursuant to Section 6(c) shall be conditioned upon (i) Employee’s execution and delivery of a valid
waiver and release of all claims that Employee may have against Employer prior to his receiving
such payments and benefits, and (ii) such release not having been revoked within the time, if any,
required by law for the revocation of a release (the “Release Requirements”). Such severance
payments and benefits shall be paid or provided commencing as soon as practicable after the Release
Requirements are satisfied; provided, however, that any such payments and benefits that are subject
to Section 409A of the Code shall be paid or provided beginning on the 60th day following the Date
of Termination provided that the Release Requirements have been satisfied on that date and, in the
event the Release Requirements are not satisfied on that date, then the severance payments and
related benefits under Section 6(c) that are subject to Section 409A of the Code shall be forfeited
and Employee shall have no further rights to such payments.
Section 7. Change in Control.
(a) If (i) a “Change in Control” (as defined in Section 7(b) hereof) shall have occurred, and
(ii) Employee’s employment with Employer has continued for twelve (12) months following such Change
in Control, Employee at his option may during the immediately following six (6) month period
terminate his employment with Employer by giving Employer a three (3) month prior notice of
termination, and such termination shall be treated as a termination for Good Reason in accordance
with Section 6(a) above. In the event of a Change of Control after the first anniversary of the
Effective Date, the then remaining term of this Agreement shall
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automatically adjust to two (2) years, commencing on the effective date of the Change in
Control.
(b) For purposes of this Agreement, a “Change in Control” shall mean the occurrence of any of
the following after the Effective Date:
(1) the acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended from
time to time (the “Exchange Act”), or any successor statute) (a “Covered Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 40% or more of either (i) the then outstanding shares of Common
Stock (the “Outstanding Company Common Stock”), or (ii) the combined voting power of
the then outstanding voting securities of Employer entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of this Section 7(b)(1), the following acquisitions shall
not constitute a Change in Control: (i) any acquisition directly from Employer or
any subsidiary of Employer, (ii) any acquisition by Employer or any subsidiary of
Employer, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Employer or any entity controlled by Employer, or
(iv) any acquisition by any corporation pursuant to a reorganization, merger,
consolidation or similar business combination involving Employer (a “Merger”), if,
following such Merger, the conditions described in Section 7(b)(3)(i) and(ii) are
satisfied; or
(2) individuals who, as of the Effective Date, constitute the Board of
Directors (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination for election by
Employer’s stockholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest (a solicitation by any person or group of
persons for the purpose of opposing a solicitation of proxies or consents by the
Board with respect to the election or removal of Directors at any annual or special
meetings of stockholders) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Covered Person other than the Board; or
(3) approval by the stockholders of Employer of a Merger, unless immediately
following such Merger, (i) substantially all of the holders of the Outstanding
Company Voting Securities immediately prior to the Merger beneficially own, directly
or indirectly, more than 50% of the common stock of the corporation resulting from
such Merger (or its parent corporation) in substantially the same proportion as
their ownership of Outstanding Company Voting Securities immediately prior to such
Merger and (ii) at least a majority of the members of the board of directors of the
corporation resulting from such Merger (or its parent corporation) were members of
the Incumbent Board at the
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time of the execution of the initial agreement providing for such Merger; or
(4) the sale or other disposition of all or substantially all of the assets of
Employer.
Section 8. Excise Tax.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution by, or benefit from, Employer or any of its affiliates
to or for the benefit of Employee, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise (any such payments, distributions or benefits being
individually referred to herein as a “Payment,” and any two or more of such payments, distributions
or benefits being referred to herein as “Payments”), would be subject to the excise tax imposed by
Section 4999 of the Code (such excise tax, together with any interest thereon, any penalties,
additions to tax, or additional amounts with respect to such excise tax, and any interest in
respect of such penalties, additions to tax or additional amounts, being collectively referred
herein to as the “Excise Tax”), then Employee shall be entitled to receive an additional payment or
payments (individually referred to herein as a “Gross-Up Payment” and any two or more of such
additional payments being referred to herein as “Gross-Up Payments”) in an amount such that after
payment by Employee of all taxes (as defined in Section 8(i)) imposed upon the Gross-Up Payment,
Employee retains an amount of such Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of Section 8(c) through (i), any determination (individually, a
“Determination”) required to be made under this Section 8(b), including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall initially be made, at Employer’s
expense, by nationally recognized tax counsel selected by Employer (“Tax Counsel”). Tax Counsel
shall provide detailed supporting legal authorities, calculations, and documentation both to
Employer and Employee within fifteen (15) business days of the termination of Employee’s
employment, if applicable, or such other time or times as is reasonably requested by Employer or
Employee. If Tax Counsel makes the initial Determination that no Excise Tax is payable by Employee
with respect to a Payment or Payments, it shall furnish Employee with an opinion reasonably
acceptable to Employee that no Excise Tax will be imposed with respect to any such Payment or
Payments. Employee shall have the right to dispute any Determination (a “Dispute”). The Gross-Up
Payment, if any, as determined pursuant to such Determination shall, at Employer’s expense, be paid
by Employer to or for the benefit of Employee within five business days of Employee’s receipt of
such Determination. The existence of a Dispute shall not in any way affect Employee’s right to
receive the Gross-Up Payment in accordance with such Determination. If there is no Dispute, such
Determination shall be binding, final and conclusive upon Employer and Employee, subject in all
respects, however, to the provisions of Section 8(c) through (i) below. As a result of the
uncertainty in the application of Sections 4999 and 280G of the Code, it is possible that Gross-Up
Payments (or portions thereof) which will not have been made by Employer should have been made
(“Underpayment”), and if upon any reasonable written request from Employee or Employer to Tax
Counsel, or upon Tax Counsel’s own initiative, Tax Counsel, at Employer’s expense, thereafter
determines that Employee is required to make a payment of any Excise Tax or any additional Excise
Tax, as the case may be, Tax Counsel shall, at Employer’s expense, determine the amount of the
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Underpayment that has occurred and any such Underpayment shall be promptly paid by Employer to
or for the benefit of Employee.
(c) Employer shall defend, hold harmless, and indemnify Employee on a fully grossed-up
after tax basis from and against any and all claims, losses, liabilities, obligations, damages,
impositions, assessments, demands, judgments, settlements, costs and expenses (including reasonable
attorneys’, accountants’, and experts’ fees and expenses) with respect to any tax liability of
Employee resulting from any Final Determination (as defined in Section 8(h)) that any Payment is
subject to the Excise Tax.
(d) If a party hereto receives any written or oral communication with respect to any
question, adjustment, assessment or pending or threatened audit, examination, investigation or
administrative, court or other proceeding which, if pursued successfully, could result in or give
rise to a claim by Employee against Employer under this Section 8 (“Claim”), including, but not
limited to, a claim for indemnification of Employee by Employer under Section 8(c), then such party
shall promptly notify the other party hereto in writing of such Claim (“Tax Claim Notice”).
(e) If a Claim is asserted against Employee (“Employee Claim”), Employee shall take or cause
to be taken such action in connection with contesting such Employee Claim as Employer shall
reasonably request in writing from time to time, including the retention of counsel and experts as
are reasonably designated by Employer (it being understood and agreed by the parties hereto that
the terms of any such retention shall expressly provide that Employer shall be solely responsible
for the payment of any and all fees and disbursements of such counsel and any experts) and the
execution of powers of attorney.
(f) Employer shall have the right to defend or prosecute, at the sole cost, expense and risk
of Employer, such Employee Claim by all appropriate proceedings, which proceedings shall be
defended or prosecuted diligently by Employer to a Final Determination; provided, however, that
(i) Employer shall not, without Employee’s prior written consent, enter into any compromise or
settlement of such Employee Claim that would adversely affect Employee, (ii) any request from
Employer to Employee regarding any extension of the statute of limitations relating to assessment,
payment, or collection of taxes for the taxable year of Employee with respect to which the
contested issues involved in, and amount of, Employee Claim relate is limited solely to such
contested issues and amount, and (iii) Employer’s control of any contest or proceeding shall be
limited to issues with respect to Employee Claim and Employee shall be entitled to settle or
contest, in his sole and absolute discretion, any other issue raised by the Internal Revenue
Service or any other taxing authority. So long as Employer is diligently defending or prosecuting
such Employee Claim, Employee shall provide or cause to be provided to Employer any information
reasonably requested by Employer that relates to such Employee Claim, and shall otherwise cooperate
with Employer and its representatives in good faith in order to contest effectively such Employee
Claim. Employer shall keep Employee informed of all developments and events relating to any such
Employee Claim (including, without limitation, providing to Employee copies of all written
materials pertaining to any such Employee Claim), and Employee or his authorized representatives
shall be entitled, at Employee’s expense, to participate in all conferences, meetings and
proceedings relating to any such Employee Claim.
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(g) In the case of any Employee Claim that is defended or prosecuted to a Final Determination
pursuant to the terms of this Section 8(g), Employer shall pay, on a fully grossed-up after tax
basis, to Employee in immediately available funds the full amount of any taxes arising or resulting
from or incurred in connection with such Employee Claim that have not theretofore been paid by
Employer to Employee, together with the costs and expenses, on a fully grossed-up after tax basis,
incurred in connection therewith that have not theretofore been paid by Employer to Employee,
within ten calendar days after such Final Determination. In the case of any Employee Claim not
covered by the preceding sentence, Employer shall pay, on a fully grossed-up after tax basis, to
Employee in immediately available funds the full amount of any taxes arising or resulting from or
incurred in connection with such Employee Claim at least ten calendar days before the date payment
of such taxes is due from Employee, except where payment of such taxes is sooner required under the
provisions of this Section 8(g), in which case payment of such taxes (and payment, on a fully
grossed-up after tax basis, of any costs and expenses required to be paid under this Section 8(g))
shall be made within the time and in the manner otherwise provided in this Section 8(g).
(h) For purposes of this Agreement, the term “Final Determination” shall mean (A) a decision,
judgment, decree or other order by a court or other tribunal with appropriate jurisdiction, which
has become final and non-appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited to, a closing
agreement under Section 7121 of the Code; (C) any disallowance of a claim for refund or credit in
respect to an overpayment of tax unless a suit is filed on a timely basis; or (D) any final
disposition by reason of the expiration of all applicable statutes of limitations.
(i) For purposes of this Agreement, the terms “tax” and “taxes” mean any and all taxes of any
kind whatsoever (including, but not limited to, any and all Excise Taxes, income taxes, and
employment taxes), together with any interest thereon, any penalties, additions to tax, or
additional amounts with respect to such taxes and any interest in respect of such penalties,
additions to tax, or additional amounts.
(j) Notwithstanding any other provision of this Section 8, any payments to Employee pursuant
to this Section 8 shall be paid to Employee no later than December 31 of the year following the
year in which Employee remits the related taxes to the applicable taxing authority.
Section 9. No Obligation to Mitigate; No Rights of Offset.
(a) Employee shall not be required to mitigate the amount of any payment or other benefit
required to be paid to Employee pursuant to this Agreement, whether by seeking other employment or
otherwise, nor shall the amount of any such payment or other benefit be reduced on account of any
compensation earned by Employee as a result of employment by another person.
(b) Employer’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 Employer may have
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against Employee or others.
Section 10. No Effect on Other Rights.
Nothing in this Agreement shall prevent or limit Employee’s continuing or future participation
in any plan, program, policy or practice of or provided by Employer or any of its affiliates and
for which Employee may qualify, nor shall anything herein limit or otherwise affect such rights as
Employee may have under any stock option or other agreements with Employer or any of its
affiliates. Amounts which are vested benefits or which Employee is otherwise entitled to receive
under any plan, program, policy or practice of or provided by, or any other contract or agreement
with, Employer or any of its affiliates at or subsequent to the Date of Termination shall be
payable or otherwise provided in accordance with such plan, program, policy or practice or contract
or agreement except as explicitly modified by this Agreement.
Section 11. Successors; Binding Agreement.
(a) This Agreement is personal to Employee and without the prior written consent of Employer
shall not be assignable by Employee otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by Employee’s personal or legal
representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.
(b) This Agreement shall inure to the benefit of and be binding upon Employer and its
successors and assigns.
(c) Employer will require any successor (whether direct or indirect, by purchase, merger,
amalgamation, consolidation or otherwise) to all or substantially all of the business and/or assets
of Employer, by agreement in form and substance reasonably satisfactory to Employee, to expressly
assume and agree to perform this Agreement in the same manner and to the same extent that Employer
would be required to perform it if no such succession had taken place. As used in this Agreement,
“Employer” shall mean Employer as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by execution and delivery of
the agreement provided for in this Section 11(c) or which otherwise becomes bound by the terms and
provisions of this Agreement by operation of law or otherwise.
Section 12. Non-Competition; Non-Solicitation; No Hire.
(a) Employee agrees that, effective as of the Effective Date and for a period of twelve (12)
months after the Date of Termination (such applicable period being referred to herein as the
“Non-Compete Period”), Employee shall not, without the prior written consent of Employer, directly
or indirectly, anywhere in the world, engage, invest, own any interest, or participate in, consult
with, render services to, or be employed by any business, person, firm or entity that is in
competition with the “Business” (as defined in Section 12(d)) of Employer or any of its
subsidiaries or affiliates, except for the account of Employer and its subsidiaries and affiliates;
provided, however, that during the Non-Compete Period Employee may acquire, solely as a passive
investment, not more than two percent (2%) of the outstanding shares or other units
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of any security of any entity subject to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended. Employee acknowledges that a remedy at law for any
breach or attempted breach of this covenant not to compete will be inadequate and further agrees
that any breach of this covenant not to compete will result in irreparable harm to Employer, and,
accordingly, Employer shall, in addition to any other remedy that may be available to it, be
entitled to specific performance and temporary and permanent injunctive and other equitable relief
(without proof of actual damage or inadequacy of legal remedy) in case of any such breach or
attempted breach. Employee acknowledges that this covenant not to compete is being provided as an
inducement to Employer to enter into this Agreement and that this covenant not to compete contains
reasonable limitations as to time, geographical area and scope of activity to be restrained that do
not impose a greater restraint than is necessary to protect the goodwill or other business interest
of Employer. Whenever possible, each provision of this covenant not to compete shall be interpreted
in such a manner as to be effective and valid under applicable law but if any provision of this
covenant not to compete shall be prohibited by or invalid under applicable law, such provision of
this covenant not to compete shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without invalidating the
remaining provisions of this covenant not to compete. If any provision of this covenant not to
compete shall, for any reason, be judged by any court of competent jurisdiction to be invalid or
unenforceable, such judgment shall not affect, impair or invalidate the remainder of this covenant
not to compete but shall be confined in its operation to the provision of this covenant not to
compete directly involved in the controversy in which such judgment shall have been rendered. In
the event that the provisions of this covenant not to compete should ever be deemed to exceed the
time or geographic limitations permitted by applicable laws, then such provision shall be reformed
to the maximum time or geographic limitations permitted by applicable law.
(b) In addition to the restrictions set forth in Section 12(a), Employee agrees that, during
the Non-Compete Period, Employee will not, either directly or indirectly, (i) make known to any
person, firm or entity that is in competition with the Business of Employer or any of its
subsidiaries or affiliates the names and addresses of any of the suppliers or customers of Employer
or any of its subsidiaries or affiliates, potential customers of Employer or any of its
subsidiaries or affiliates upon whom Employer or any of its subsidiaries or affiliates has called
upon in the twelve (12) months preceding the Date of Termination, or (ii) call on, solicit, or take
away, or attempt to call on, solicit or take away any of the suppliers or customers of Employer or
any of its subsidiaries or affiliates, whether for Employee or for any other person, firm or
entity.
(c) Regardless of the reason for any termination of Employee’s employment, effective as of the
Effective Date and for twelve (12) months following the Date of Termination, Employee will not,
either on his or her own account or for any other person, firm, partnership, corporation, or other
entity (i) solicit any employee of Employer or any of its subsidiaries or affiliates to leave such
employment; or (ii) induce or attempt to induce any such employee to breach her or his employment
agreement with Employer or any of its subsidiaries or affiliates. This restriction shall not apply
in the case of any employee or former employee of Employer who at his or her own initiative seeks,
without solicitation or encouragement by Employee, a change of employment or responds to
solicitations made by means of general advertisement.
(d) As used in this Agreement, “Business” means the business of (i) design,
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manufacture, marketing and sale of equipment for seismic acquisition, (ii) seismic processing
and (iii) seismic interpretation.
(e) In the event that Employee breaches or violates any of the terms and conditions of this
Section 10 during the Non-Compete Period, then in addition to the other rights and remedies
available to Employer hereunder, Employer’s obligations to pay to Employee any remaining
installments of the Severance Payment otherwise due and owing pursuant to Section 6(c)(3) or 7(a)
hereof, shall cease and terminate.
Section 13. Miscellaneous.
(a) All notices and other communications required or permitted hereunder or necessary or
convenient in connection herewith will be in writing and will be delivered by hand or by registered
or certified mail, return receipt requested to the addresses set forth below in this Section 13(a):
If to Employer, to:
ION Geophysical Corporation
0000 XxxxXxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000-0000
Attention: Chief Executive Officer
with a copy to:
ION Geophysical Corporation
0000 XxxxXxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000-0000
Attention: General Counsel
0000 XxxxXxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000-0000
Attention: Chief Executive Officer
with a copy to:
ION Geophysical Corporation
0000 XxxxXxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000-0000
Attention: General Counsel
If to Employee, to:
Xxxxx X. Xxxxxx
0000 XxxxXxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000-0000
0000 XxxxXxxx Xxxx., Xxxxx 000
Xxxxxxx, XX 00000-0000
or to such other names or addresses as Employer or Employee, as the case may be, designate by
notice to the other party hereto in the manner specified in this Section.
(b) This Agreement supersedes, replaces and merges all previous agreements and discussions
relating to the same or similar subject matters between Employee and Employer and constitutes the
entire agreement between Employee and Employer with respect to the subject matter of this
Agreement, except for any other agreements expressly referred to in this Agreement, each of which
shall remain in full force and effect. This Agreement may not be modified in any respect by any
verbal statement, representation or agreement made by any employee, officer, or representative of
Employer or by any written agreement unless signed by an officer of Employer who is expressly
authorized by the Board to execute such document.
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(c) If any provision of this Agreement or application thereof to any one or under any
circumstances should be determined to be invalid or unenforceable, such invalidity or
unenforceability will not affect any other provisions or applications of this Agreement which can
be given effect without the invalid or unenforceable provision or application. In addition, if any
provision of this Agreement is held by an arbitration panel or a court of competent jurisdiction to
be invalid, unenforceable, unreasonable, unduly restrictive or overly broad, the parties intend
that such arbitration panel or court modify said provision so as to render it valid, enforceable,
reasonable and not unduly restrictive or overly broad.
(d) The internal laws of the State of Texas will govern the interpretation, validity,
enforcement and effect of this Agreement without regard to the place of execution or the place for
performance thereof.
(e) The covenants, agreements, rights and obligations of Employer under this Agreement, and
the covenants, agreements, rights and obligations of Employee under this Agreement, shall survive
the termination of this Agreement for any reason including, but not limited to, the termination of
Employee’s employment with Employer. All covenants, agreements, indemnities, warranties, rights
and obligations contained herein shall continue for so long as necessary in order for Employer and
Employee to enforce their rights hereunder.
Section 14. Arbitration.
(a) Employer and Employee agree to submit to final and binding arbitration any and all
disputes or disagreements concerning the interpretation or application of this Agreement. Any such
dispute or disagreement will be resolved by arbitration in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association (the “AAA Rules”).
Arbitration will take place in Houston, Texas, unless the parties mutually agree to a different
location. Within thirty (30) calendar days of the initiation of arbitration hereunder, each party
will designate an arbitrator. The appointed arbitrators will then appoint a third arbitrator.
Employee and Employer agree that the decision of the arbitrators will be final and binding on both
parties. Any court having jurisdiction may enter a judgment upon the award rendered by the
arbitrators. In the event the arbitration is decided in whole or in part in favor of Employee,
Employer will reimburse Employee for his reasonable costs and expenses of the arbitration
(including reasonable attorneys’ fees).
(b) Notwithstanding the provisions of Section 14(a), Employer may, if it so chooses, bring an
action in any court of competent jurisdiction for injunctive relief to enforce Employee’s
obligations under Sections 3(b), 3(c), 3(d), and 3(e).
Section 15. Additional Section 409A Provisions.
To the extent that any benefits payable under this Agreement are subject to Section 409A of
the Code, it is agreed that no party shall (i) accelerate into the current year any amounts that
would not otherwise be payable in the current year, or (ii) defer past the current year any such
payments that would otherwise be payable in the current year. Notwithstanding any provision
contained in this Agreement to the contrary, if (a) any payment hereunder is subject to Section
409A of the Code, (b) such payment is to be paid on account of Employee’s separation from
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service (within the meaning of Section 409A of the Code) and (iii) Employee is a “specified
employee” (within the meaning of Section 409A(a)(2)(B) of the Code), then such payment shall be
delayed until the first day of the seventh month following Employee’s separation from service (or,
if later, the date on which such payment is otherwise to be paid under this Agreement)
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this
Agreement as to be effective as of the Effective Date.
| EMPLOYER: ION GEOPHYSICAL CORPORATION |
||||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||
| Xxxxxx X. Xxxxxxx | ||||
| Chief Executive Officer | ||||
| EMPLOYEE: |
||||
| /s/ Xxxxx X. Xxxxxx | ||||
| Xxxxx X. Xxxxxx | ||||
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