EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement dated as of June 24, 2002 (this "Agreement"),
is entered into between Grant Prideco, Inc., a Delaware corporation (the
"Company"), and Xxxxxxx XxXxxxx (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Board of Directors of the Company (the "Board") has
previously determined that it is in the best interests of the Company and its
stockholders to retain the Executive and to induce the employment of the
Executive for the long-term benefit of the Company;
WHEREAS, the Board does not contemplate the termination of the
Executive during the term hereof and the Board and the Executive expect that the
Executive will be retained for at least the three-year period contemplated
herein; and
WHEREAS, to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment.
(a) The Company hereby agrees that the Company or an
affiliated company will continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement, during the Employment Period (as
defined below).
(b) The "Employment Period" shall mean the period commencing
on the date hereof (the "Effective Date") and ending on the third anniversary of
the Effective Date; provided, however, that commencing on the date one year
after the Effective Date, 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 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Employment Period shall not be so extended.
2. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements, authority, duties and responsibilities) shall be
President and Chief Executive Officer and (B) the
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Executive's services shall be performed at the Company's
principal executive offices in Houston, Texas or other
locations less than 35 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 reasonable attention
and time during normal business hours 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 of $450,000
("Annual Base Salary"), which shall be paid in accordance with
the normal payroll practices of the Company. During the
Employment Period, the Annual Base Salary shall be reviewed no
more than 12 months after the last salary increase awarded to
the Executive prior to the date hereof and thereafter at least
annually; provided, however, that a salary increase shall not
necessarily be awarded as a result of such review. Any
increase in Annual Base Salary may not serve to limit or
reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any
such increase. The term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. The Executive shall be eligible
for an annual bonus (the "Annual Bonus") for each fiscal year
ending during the Employment Period at the highest award level
under the Company's executive officer annual incentive
program. Each such Annual Bonus shall be paid no later than
the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless
the Executive shall elect to defer the receipt of such Annual
Bonus pursuant to a Company sponsored deferred compensation
plan in effect.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to the
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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. As used in this Agreement,
the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the
Company.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the
case may be, shall be eligible to participate in and shall
receive all benefits under welfare benefit plans, practices,
policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee
life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable
generally to the Executive's peer executives of the Company
and its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the Executive
with benefits 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 (including,
without limitation, financial planning services, payment of
club dues, a car allowance of $1,000 per month or use of an
automobile and payment of related expenses, as appropriate) in
accordance with the most favorable plans, practices, programs
and policies of the Company in effect on the date hereof.
(vii) Vacation. During the Employment Period, the
Executive shall be entitled to three weeks of paid vacation or
such greater amount as may be applicable under the most
favorable plans, policies, programs and practices of the
Company and its affiliated companies in effect for the
Executive on the date hereof.
(viii) Restricted Stock and Options. As of the
Effective Date, the Executive was granted 500,000 restricted
shares of the Company's Common Stock, $.01 par value ("Common
Stock"). Such shares are subject to three year cliff vesting;
provided, however, if the employment of the Executive under
this Agreement is
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terminated prior to the shares being fully vested for any
reason other than by the Company for Cause or Disability, the
death of the Executive or by the Executive for any reason
other than for Good Reason, such shares shall become vested on
the termination date. Until the shares of Common Stock are
vested, the Executive may not transfer, pledge or dispose of
the unvested shares. The Executive, however, may vote any
unvested shares and be entitled to receive any dividends or
distributions (other than noncash distributions, which shall
be subject to the same vesting restrictions as the shares of
Common Stock for which such distributions were received). The
Company may also hold the unvested shares until they have
vested. The Executive may elect to deliver shares of Common
Stock (valued at their then current market price) to the
Company in satisfaction of any withholding obligation the
Company may have on the vesting of such shares. Such shares
shall be subject to accelerated vesting as provided in Section
4(a). Such shares shall also be subject to accelerated vesting
on a change of control as defined in the Company's form of
stock option agreement. Within 30 days of the Effective Date,
the Executive shall also be granted options under the
Company's stock option plan to purchase an aggregate of
250,000 shares of Common Stock at an exercise price per share
equal to the closing sale price of a share of Common Stock as
of the date of the option grant, which options are subject to
three year cliff vesting.
(ix) Retirement Plan. The Executive will be entitled
to a retirement benefit equal to 60% of his Annual Base Salary
and target Annual Bonus at age 60 (the "Retirement Plan"). The
Retirement Plan will have the following terms:
(A) the Executive will be eligible for early
retirement beginning at age 55 with a reduced
retirement benefit of 5% per year;
(B) the Retirement Plan may be funded by a
Company owned life insurance policy;
(C) upon the death of the Executive, the
retirement benefit will be determined as follows:
(1) if death occurs prior to age 55,
the retirement benefit will be
calculated assuming retirement at
age 60 using the Executive's salary
as of his death, then reduced by 25%
and then discounted to present value
at age of death;
(2) if death occurs after age 55,
the retirement benefit will be
reduced by 5% per year for each year
before age 60; and
(3) if death occurs following
retirement, the retirement benefit
will be paid according to the payout
option selected at time of
retirement.
(D) upon the disability of the Executive,
the retirement benefit will be determined as follows:
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(1) if disability occurs before age
55, the retirement benefit would
begin at age 55 and be equal to the
normal retirement benefit reduced by
25%;
(2) if disability occurs after age
55 but prior to age 60, the
retirement benefit would begin
immediately and be equal to the
normal retirement benefit reduced by
5% for each year such disability
occurred prior to age 60.
(E) the Executive will select from the
following benefit election options: (1)
Joint and Survivor, (2) single life or (3)
10 year certain. The Executive must make
such election at the time of vesting, which
such election may be changed at any time
prior to one year before the death,
disability or retirement of the Executive.
(F) in the event of the termination of
employment of the Executive (other than by
the Company for Cause or by the Executive
for any reason other than Good Reason) or a
change of control of the Company (as defined
in the Company's stock option agreement),
the Executive would become immediately 100%
vested in his retirement benefit and receive
a lump sum payout, which payment shall be
actuarially calculated in the same manner as
the retirement benefit payable upon the
death of the Executive.
3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 10(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company on a
full-time basis for 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
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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 of the Company which specifically identifies the manner
in which the Board 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 a senior
officer of the Company or based upon the advice of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company. The cessation of employment
of the Executive shall not be deemed to be for Cause unless and until there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Executive is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
(c) Good Reason. The Executive's employment may be terminated
by the Executive during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting
requirements), 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 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
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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;
(v) in the event of a merger, consolidation or other
business combination of the Company in which the Company's
securities cease to be publicly traded, the assignment to the
Executive of any position (including status, offices, titles
and reporting requirements), authority, duties or
responsibilities that are not (A) at or with the ultimate
parent company of the entity surviving or resulting from such
merger, consolidation or other business combination and (B)
substantially similar to the Executive's position (including
status, offices, titles and reporting requirements),
authority, duties and responsibilities as contemplated by
Section 2(a); or
(vi) any failure by the Company to comply with and
satisfy Section 9(c) of this Agreement.
For purposes of this Section 3(c), any good faith
determination of "Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Executive for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 10(b) of the Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice 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;
(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
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(iii) if the Executive's employment is terminated by
reason of death or Disability, the Date of Termination shall
be the date of death of the Executive or the Disability
Effective Date, as the case may be.
4. Obligations of the Company Upon Termination.
(a) Good Reason; Other than For Cause, Death or Disability.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause, death or Disability, or the Executive shall
terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
(A) the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of (x)
the higher of (I) the highest Annual Bonus received
by the Executive over the preceding three year period
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", it being agreed that for purposes of
determining the Highest Annual Bonus, the Executive
will be deemed to have received a bonus of 100% of
his Annual Base Salary for the year ended December
31, 2002) 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") or any other deferred
compensation plan during the 12-month period
immediately preceding the month of the Executive's
Date of Termination multiplied by three, such amount
to be grossed up so that the amount the Executive
actually receives after payment of any federal or
state taxes payable thereon equals the amount first
described above.
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(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 re-employed by another employer
and is eligible to receive medical or other welfare benefits
under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period
of eligibility;
(iii) The Company shall, at its sole expense as
incurred, provide the Executive with outplacement services,
the scope and provider of which shall be selected by the
Executive in his sole discretion;
(iv) With respect to all options to purchase Common
Stock held by the Executive pursuant to a Company stock option
plan on or prior to the Date of Termination, irrespective of
whether such options are then exercisable, the Executive shall
have the right, during the 60-day period after the Date of
Termination, to elect to surrender all or part of such options
in exchange for a cash payment by the Company to the Executive
in an amount equal 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
60-day period prior to and including the Executive's Date of
Termination. Such cash payments shall be made within 30 days
after the date of the Executive's election; provided, however,
that if the Executive's Date of Termination is within six
months after the date of grant of a particular option held by
the Executive and the Executive is subject to Section 16(b) of
the Securities Exchange Act of 1934, as amended, any cash
payments related thereto shall be made on the date which is
six months and one day after the date of grant of such option
to the extent necessary to prevent the imposition of the
disgorgement provisions under Section 16(b). Notwithstanding
the foregoing, if any right granted pursuant to the foregoing
would make any change of control transaction ineligible for
pooling of interests accounting treatment under XXX Xx. 00
that but for this Section 4(a)(iv) would otherwise be eligible
for such accounting treatment, the Executive shall receive in
substitution for the cash payment a number of shares of Common
Stock determined by dividing the amount of cash that would
otherwise be payable to the Executive hereunder by the average
closing sales price of the Common Stock, as reported by the
New York Stock Exchange, for the ten trading days immediately
prior to the date such payment is due to be made (rounding up
to the
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nearest whole number), provided that any such shares of Common
Stock so granted to the Executive shall be registered under
the Securities Act of 1933, as amended; any options
outstanding as of the Date of Termination and not then
exercisable shall become fully exercisable as of the
Executive's Date of Termination, and to the extent the
Executive does not elect to surrender same for a cash payment
(or the equivalent number of shares of Common Stock) as
provided above, such options shall remain exercisable for one
year after the Executive's Date of Termination or until the
stated expiration of the stated term thereof, whichever is
longer;
(v) restrictions applicable to any shares of Common
Stock granted to the Executive by the Company shall lapse, as
of the date of the Executive's Date of Termination;
(vi) 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;
(vii) 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;
(viii) All benefits under the Company's Executive
Deferred Compensation Plan, the 401(k) Plan, the Retirement
Plan and any other similar plans, including any stock options
or restricted stock held by the Executive, not already vested
shall be 100% vested, to the extent such vesting is permitted
under the Code (as defined below);
(ix) 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
(x) 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
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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 30 days after the
Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 4(b) shall include, without
limitation, and the Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits provided by the
Company and affiliated companies to the estates and beneficiaries of the
Executive's peer executives of the Company and such affiliated companies under
such plans, programs, practices and policies relating to death benefits, if any,
in effect on the date hereof or, if more favorable, those in effect on the date
of the Executive's death.
(c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days after the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
4(c) shall include, without limitation, and the Executive shall be entitled
after the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable benefits generally provided by the Company and
its affiliated companies to the Executive's disabled peer executives and/or
their families in accordance with such plans, programs, practices and policies
relating to disability, if any, in effect generally on the date hereof or, if
more favorable, those in effect at the time of the Disability.
(d) Cause; Other Than for Good Reason. If the Executive's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive, other than the
obligation to pay to the Executive (x) his Annual Base Salary through the Date
of Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore
unpaid. If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for Accrued Obligations
and the timely payment or provision of Other Benefits. In such case, all Accrued
Obligations shall be paid to the Executive in a lump sum in cash within 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
5. Other Rights. Except as provided hereinafter, nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies and for which the Executive may qualify, nor,
shall anything herein limit or otherwise affect such rights as the Executive may
have under any contract or agreement with the Company or any of its affiliated
companies. Except as provided hereinafter, amounts 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 shall have no right
to receive, and hereby waives any entitlement to, any severance pay or similar
benefit under any other plan, policy, practice or program of the Company. In
addition,
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if the Executive has an employment or similar agreement with the Company at the
Date of Termination, he agrees that he 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 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").
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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 determined that the Executive is
entitled to a Gross-Up Payment, but that the Executive, after taking into
account the Payments and the Gross-Up Payment, would not receive a net after-tax
benefit of at least $50,000 (taking into account both income taxes and any
Excise Tax) as compared to the net after-tax proceeds to the Executive resulting
from an elimination of the Gross-Up Payment and a reduction of the Payments, in
the aggregate, to an amount (the "Reduced Amount") such that the receipt of
Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall
be made to the Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 7(c), all
determinations required to be made under this Section 7, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination shall be made
by Xxxxxx Xxxxxxxx LLP or, as provided below, such other certified public
accounting firm as may be designated by the Executive (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days after the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the change of control, the
Executive shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 7, shall be paid by the Company to the
Executive within five days after the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments 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
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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 Internal Revenue Service seeks higher payment. Such
notification shall be given as soon as practicable, but no later than ten
business days after the Executive is informed in writing of such claim, and
shall apprise the Company of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the 30-day period following the date on which he gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies the
Executive in writing prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(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
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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.
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 public knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement), information that is developed
by the Executive independently of such information, or knowledge or data or
information that is disclosed to the Executive by a third party under no
obligation of confidentiality to the Company. After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and shall not
be assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
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(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. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICT OF LAWS. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not be
amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Xxxxxxx XxXxxxx
00 Xxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
If to the Company: Grant Prideco, Inc.
0000 Xxxx Xxx Xxxx.
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: 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
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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.
(f) This Agreement constitutes the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements between the parties relating to the subject
matter hereof, including, without limitation, the Employment Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Xxxxxxx XxXxxxx
-------------------------------------
Xxxxxxx XxXxxxx
GRANT PRIDECO, INC.
By /s/ Xxxxxxx X. Duroc-Xxxxxx
-----------------------------------
Xxxxxxx X. Duroc-Xxxxxx
Chairman of the Board
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