EMPLOYMENT AGREEMENT
EXHIBIT 10.5
This EMPLOYMENT AGREEMENT (this “Agreement”), dated effective as of December 22, 2008, by and
among National Oilwell Varco L.P., a Delaware limited partnership (the “Company”), National Oilwell
Varco, Inc., a Delaware corporation (“NOI”), and Xxxxxx Xxxxxxxxx (the “Executive”).
WITNESSETH:
WHEREAS, the Board of Directors of NOI (the “Board”) has previously determined that it is in
the best interests of NOI and its stockholders to retain the Executive and to induce the employment
of the Executive for the long term benefit of NOI, its shareholders and its affiliated companies,
including the Company;
WHEREAS, the Board does not contemplate the termination of the Executive during the term
hereof and the Board and the Executive expect that the Executive will be retained for at least the
one year period contemplated herein; and
WHEREAS, to accomplish these objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. EMPLOYMENT.
(a) The Company hereby agrees that the Company or an affiliated company will continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company or
an affiliated company subject to the terms and conditions of this Agreement, during the Employment
Period (as defined below). As used in this Agreement, the term “affiliated companies” shall include
any company controlled by, controlling or under common control with the Company.
(b) The “Employment Period” shall mean the period commencing on the date hereof and ending on
the first (1st) anniversary of the date hereof; provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the “Renewal Date”), unless previously
terminated, the Employment Period shall be automatically extended so as to terminate one year after
such Renewal Date, unless at least sixty (60) days prior to the Renewal Date the Company shall give
notice to the Executive that the Contract Period shall not be so extended.
2. TERMS OF EMPLOYMENT.
(a) Position and Duties.
(i) During the Employment Period, (A) the Executive’s position (including status, offices,
titles and reporting requirements, authority, duties and responsibilities) shall be substantially
similar to that in effect as of the date hereof and (B) the Executive’s services shall be performed
at the location where the Executive was employed immediately preceding the date hereof or any
office or location less than fifty (50) miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote the Executive’s full time, skill
and attention to the business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive’s reasonable best
efforts to perform faithfully and efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (C) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive’s responsibilities as an employee of
the Company in accordance with this Agreement. It is expressly understood and agreed that to the
extent that any such activities have been conducted by the Executive prior to the date hereof, the
continued conduct of such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the date hereof shall not thereafter be deemed to interfere with the
performance of the Executive’s responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive shall receive an annual base
salary equal to the current base salary being received by the Executive (“Annual Base Salary”),
which shall be paid in accordance with the Company’s standard payroll practice. During the
Employment Period, the Annual Base Salary shall be reviewed no more than twelve (12) months after
the last salary increase awarded to the Executive prior to the date hereof and thereafter at least
annually; provided, however, that a salary increase shall not necessarily be awarded as a result of
such review. Any increase in Annual Base Salary may not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any
increase without the express written consent of the Executive. The term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. The Executive shall be eligible for an annual bonus the “Annual Bonus”) for
each fiscal year ending during the Employment Period on the same basis as other executive officers
under the Company’s then current Annual Incentive Plan (or such other name as may be adopted for
the plan or its successor), which shall be payable in accordance with the terms of such plan.
(iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive
shall be entitled to participate in all incentive, stock option, savings and retirement plans,
practices, policies and programs applicable generally to the Executive’s peer executives of the
Company and its affiliated companies, but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its affiliated companies
for the Executive under such plans, practices, policies and programs as in effect on the date
hereof.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive’s
family, as the case may be, shall be eligible to participate in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel accident insurance plans
and
programs) to the extent applicable generally to the Executive’s peer executives of the Company
and its affiliated companies, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the aggregate, than such plans,
practices, policies and programs in effect for the Executive on the date hereof.
(v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in accordance with the most
favorable policies, practices and procedures of the Company and its affiliated companies in effect
for the Executive on the date hereof.
Any reimbursement of expenses required under this paragraph and any reimbursement of legal
fees and expenses required under Section 6(c) of this Agreement shall be made by the Company upon
or as soon as practicable following receipt of supporting documentation reasonably satisfactory to
the Company (but in any event not later than the close of the Executive’s taxable year following
the taxable year in which the fee, disbursement, cost or expense is incurred by the Executive);
provided, however, that, upon the Executive’s termination of employment with the Company, in no
event shall any additional reimbursement be made prior to the date that is six months after the
date of the Executive’s termination of employment to the extent such payment delay is required
under Section 409A(a)(2)(B)(i) of the Internal Revenue Code of 1986, as amended (the “Code”). In
no event shall any reimbursement be made to the Executive for such expenses and fees incurred after
the later of (1) the tenth anniversary of the date of the Executive’s death or (2) the date that is
ten years after the date of the Executive’s termination of employment with the Company.
(vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled to fringe
benefits (including, without limitation, financial planning services, payment of club dues, a car
allowance or use of an automobile and payment of related expenses, as appropriate) in accordance
with the most favorable plans, practices, programs and policies of the Company in effect on the
date hereof.
(vii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation
in accordance with the most favorable plans, policies, programs and practices of the Company and
its affiliated companies in effect for the Executive on the date hereof.
3. TERMINATION OF EMPLOYMENT.
(a) Death or Disability. The Executive’s employment shall terminate automatically upon the
Executive’s death during the Employment Period. If the Company determines in good faith that a
Disability of the Executive has occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Executive written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Executive’s employment. In such
event, the Executive’s employment with the Company shall terminate effective thirty (30) days after
receipt of such notice by the Executive (the “Disability Effective Date”), provided that within the
thirty (30) day period after such receipt, the Executive shall not have returned to full-time
performance of the Executive’s duties. For purposes of this Agreement, “Disability” shall mean the
absence of the Executive from the Executive’s duties with the Company on a full-time basis for one
hundred eighty (180) calendar days as a result of incapacity due to mental or physical illness
which is determined to be total and permanent by a physician selected by the Company or its
insurers and acceptable to the Executive or the Executive’s legal representative.
(b) Cause. The Company may terminate the Executive’s employment during the Employment Period
for Cause. For purposes of this Agreement, “Cause” shall mean:
(i) the willful and continued failure of the Executive to perform substantially the
Executive’s duties with the Company or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive Officer of the
Company which specifically identifies the manner in which the Board or Chief Executive Officer
believes that the Executive has not substantially performed the Executive’s duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Company. For purposes of this provision, no act, or
failure to act, on the part of the Executive shall be considered “willful” unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s
action or omission was in the best interests of the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the
Chief Executive Officer or of a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(c) Good Reason. The Executive may terminate the Executive’s employment during the Employment
Period for Good Reason. For purposes of this Agreement, “Good Reason” shall mean:
(i) the assignment to the Executive of any duties inconsistent in any respect with the
Executive’s position (including status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 2(a) of this Agreement, or any other action
by the Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of Section 2(b) of this
Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith
and which is remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company’s requiring the Executive to be based at any office or location other than
as provided in Section 2(a)(i)(B) hereof or the Company’s requiring the Executive to travel on
Company business to a substantially greater extent than required immediately prior to the date
hereof;
(iv) any purported termination by the Company of the Executive’s employment otherwise than as
expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section 9(c) of this Agreement, or
(vi) notice by the Company to the Executive that the Company is not extending or renewing this
Agreement.
(d) Notice of Termination. Any termination during the Employment Period by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 11(b) of the Agreement. For purposes of this
Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as
defined below) is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than 30 days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the
Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the
Company’s rights hereunder.
(e) Date of Termination. “Date of Termination” shall mean:
(i) if the Executive’s employment is terminated by the Company for Cause, or by the Executive
for Good Reason, the date of receipt of the Notice of Termination or any later date specified
therein, as the case may be;
(ii) if the Executive’s employment is terminated by the Company other than for Cause, death or
Disability, the Date of Termination shall be the date on which the Company notifies the Executive
of such termination; and
(iii) if the Executive’s employment is terminated by reason of death or Disability, the Date
of Termination shall be the date of death of the Executive or the Disability Effective Date, as the
case may be.
For purposes of any payments or provision of benefits under this Agreement, the Executive
shall not be considered to have terminated employment with the Company unless the Executive incurs
a “separation from service” with the Company within the meaning of Section 409A(a)(2)(A)(i) of the
Code and applicable guidance issued thereunder.
4. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) Good Reason; Other than For Cause, Death or Disability. If, during the Employment Period,
the Company shall terminate the Executive’s employment other than for Cause, death or Disability,
or the Executive shall terminate employment for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash within thirty (30) days after
the Date of Termination the aggregate of the following amounts:
(A) the sum of (1) the Executive’s Annual Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of (x) the higher of (I) the highest Annual Bonus
received by the Executive over the preceding three-year period and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has been earned but deferred (and annualized
for any fiscal year consisting of less than 12 full months or during which the Executive was
employed for less than 12 full months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount being referred to as the “Highest Annual
Bonus”) and (y) a fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365, and (3) any accrued
vacation pay, 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 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 maximum amount of employer matching contributions that could have
been credited to the Executive under the Company’s 401(k) Savings Plan (without regard to any
applicable nondiscrimination tests), any other excess or supplemental retirement plan in which the
Executive participates or any other deferred compensation plan during the twelve (12) month period
immediately preceding the month of the Executive’s Date of Termination, 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 and
(D) no amounts shall be paid or payable to Executive under the Company’s performance-based
incentive plans, including the then current National Oilwell Annual Incentive Plan (or such other
name as may be adopted for the plan or its successor), for the year in which the Date of
Termination occurs.
(ii) Until the date of the Executive’s death, the Company shall continue group health plan (as
defined for purposes of section 4980B of the Code) 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 as if the
Executive’s employment had not been terminated; provided, that if the Executive’s participation
after the Date of Termination in such group health plan is not permitted by the terms of a plan,
then for the Executive’s lifetime, the Company shall provide the Executive with substantially the
same benefits that were provided to the Executive by that plan immediately before the Termination
Date; provided further, that if the Executive becomes reemployed by another employer and is
eligible to receive any of such benefits under another employer provided plan, the benefits
provided hereunder shall be secondary to those provided under such other plans. With respect to
any group health plan that requires an employee contribution, for the period of time during which
the Executive would be entitled (or would, but for this Agreement, be entitled to continuation
coverage under a group health plan of the Company under Section 4980B of the Code if the Executive
elected such coverage and paid the applicable premiums (generally, 18 months), the Executive shall
pay the then active employee cost of the benefits as determined under the then current practices of
the Company on a monthly, semi-annual or annual basis as elected by the Executive, and thereafter,
the Executive shall pay the full cost of the benefits as determined under the then current
practices of the Company on a monthly or annual basis as elected by the Executive, provided that
the Company shall reimburse the Executive the amount of the costs of the benefit that is in excess
of the then active employees costs for such benefits no later than 30 days following the end of the
Executive’s taxable year in which such reimbursable amounts are paid by the Executive, and provided
further that the reimbursements provided, during the Executive’s taxable year shall not affect the
expenses eligible for reimbursement in any other taxable year (with the exception of applicable
lifetime maximums applicable to medical expenses or medical benefits described in Section 105(b) of
the Code) and the right to reimbursement hereunder shall not be subject to liquidation or exchange
for another benefit or payment;
(iii) The Company shall reimburse Executive for all outplacement services incurred on and
prior to the last day of the second calendar year following the year in which the Date of
Termination occurs up to a maximum direct cost to the Company of up to 15% of the Executive’s
Annual Base Salary as of the Date of Termination Company shall reimburse Executive within 30 days
after Executive provides the Company with an invoice (and any supporting documentation required by
the Company) for such outplacement services, but in no event shall any such reimbursement be made
after the last day of the third calendar year following the year in which the Date of Termination
occurs.
(iv) All options to purchase Common Stock held by the Executive pursuant to a stock option
plan on or prior to the Date of Termination shall be governed by the terms of the option agreement
or plan between the Executive, NOI, and/or the Company; and any restricted stock held by the
Executive, not already vested shall be 100% vested;
(v) Any compensation previously deferred by the Executive under a plan sponsored by the
Company (together with any accrued interest or earnings thereon) shall be distributed at the
earliest time permitted by such plan or, if permitted under the terms of such plan and all
applicable laws, statutes or regulations governing such plans, at such other time as the Executive
may elect under the terms of such plan;
(vi) 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
(vii) 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.
Provided that, notwithstanding anything contained herein to the contrary, in accordance with
Section 409A of the Code, if the Executive is determined by the Board (or its delegate) to be a
“specified employee” (as described in Section 409A of the Code) for the year in which Executive’s
Date of Termination occurs, any payments or in-kind benefits due hereunder that are not permitted
to be paid or provided on the date(s) specified hereunder without the imposition of additional
taxes, interest and penalties under Section 409A of the Code shall be paid in a lump sum or
provided on the first business day following the six-month anniversary of the Date of Termination
or, if earlier, Executive’s death (the “409A Payment Date”).
(b) Death. If Executive’s employment is terminated by reason of the Executive’s death during
the Employment Period, this Agreement shall terminate without further obligations to the
Executive’s legal representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive’s estate or beneficiaries, as applicable, in a lump sum in cash within thirty
(30) days after the Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 4(b) shall include, without limitation, and the
Executive’s estate and/or beneficiaries shall be entitled to receive, benefits at least equal to
the most favorable benefits provided by the Company and affiliated companies to the estates and
beneficiaries of the Executive’s peer executives of the Company and such affiliated companies under
such plans, programs, practices
and policies relating to death benefits, if any, in effect on the date hereof or, if more
favorable, those in effect on the date of the Executive’s death.
(c) Disability. If the Executive’s employment is terminated by reason of the Executive’s
Disability during the Employment Period, this Agreement shall terminate without further obligations
to the Executive, other than for payment of Accrued Obligations and the timely payment or provision
of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within
thirty (30) days after the Date of Termination. With respect to the provision of Other Benefits,
the term Other Benefits as utilized in this Section 4(c) shall include, without limitation, and the
Executive shall be entitled after the Disability Effective Date to receive, disability and other
benefits at least equal to the most favorable benefits generally provided by the Company and its
affiliated companies to the Executive’s disabled peer executives and/or their families in
accordance with such plans, programs, practices and policies relating to disability, if any, in
effect generally on the date hereof or, if more favorable, those in effect at the time of the
Disability.
(d) Cause; Other Than for Good Reason. If the Executive’s employment is terminated for Cause
during the Employment Period, this Agreement shall terminate without further obligations to the
Executive, other than the obligation to pay to the Executive (x) his or her Annual Base Salary
through the Date of Termination, (y) the amount of any compensation previously deferred by the
Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive
voluntarily terminates employment during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all
Accrued Obligations shall be paid to the Executive in a lump sum in cash within thirty (30) days
after the Date of Termination subject to such other options or restrictions as provided by law.
5. OTHER RIGHTS.
Except as provided herein, nothing in this Agreement shall prevent or limit the Executive’s
continuing or future participation in any plan, program, policy or practice provided by the Company
or any of its affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies. Except as provided herein, amounts
which are vested benefits or which the Executive is otherwise entitled to receive under any plan,
policy, practice or program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be payable in accordance
with such plan, policy, practice or program or contract or agreement. It is expressly agreed by the
Executive that he or she shall have no right 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.
The Executive also agrees that to the extent he or she may be eligible for any severance pay or
similar benefit under any laws providing for severance or termination benefits, such other
severance pay or similar benefit shall be coordinated with the benefits owed hereunder, such that
the Executive shall not receive duplicate benefits.
6. FULL SETTLEMENT.
(a) No Rights of Offset. The Company’s obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-
off, counterclaim, recoupment, defense or other claim, right or action which the Company may
have against the Executive or others.
(b) No Mitigation Required. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and such amounts shall not be reduced whether or not
the Executive obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expense which the Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company or the Executive of the validity or
enforceability of, or liability under, any provision of this Agreement or any guarantee of
performance thereto (including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code.
7. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Although this Agreement is not being entered into in connection with or contingent upon a
change of control of the Company, anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment or distribution by
the Company to or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 7) (a “Payment”) would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the
Executive with respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Executive shall
be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after
payment by the Executive of all taxes (including any interest or penalties imposed with respect to
such taxes), including without limitation, any income taxes (and any interest and penalties imposed
with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding
the foregoing provisions of this Section 7(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the Executive, after taking into account the Payments and
the Gross-Up Payment, would not receive a net after-tax benefit of at least $50,000 (taking into
account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to the
Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payments, in
the aggregate, to an amount (the “Reduced Amount”) such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 7(c), all determinations required to be made under
this Section 7, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination shall be made
by Ernst & Young, L.L.P., 0000 XxXxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 or, as provided below,
such other certified public accounting firm as may be designated by the Executive (the “Accounting
Firm”) which shall provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days after the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity or group
affecting a change of control of the Company, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant
to this Section 7, shall be paid by the Company to the Executive within five days after the receipt
of the Accounting Firm’s determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company should have been made
(“Underpayment”), consistent with the calculations required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to Section 7(c) and the Executive thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment (or
an additional Gross-Up Payment) in the event the IRS seeks higher payment. Such notification shall
be given as soon as practicable, but no later than ten business days after the Executive is
informed in writing of such claim, and shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The Executive shall not pay such claim prior
to the expiration of the thirty (30) day period following the date on which he gives such notice
to the Company (or such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by the Company relating to such
claim;
(ii) take such action in connection with contesting such claim as the Company shall reasonably
request in writing from time to time, including without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings relating to such claims; provided,
however, that the Company shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such costs and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 7(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole option, may pursue
or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct the Executive to pay
the tax claimed and xxx for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided,
however, that if the Company directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive, on an interest-free basis and
shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes for the taxable year
of the Executive with respect to which such contested amount is claimed to be due is limited solely
to such contested amount. Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any other issues raised by the Internal
Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Section 7(c), the Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company’s complying with the requirements of Section 7(c)) promptly
pay to the Company the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 7(c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
(e) Notwithstanding anything in this Agreement to the contrary, in accordance with Section
409A of the Code, any additional payments due to Executive under this Section 7 shall be paid by
the Company no later than the end of the Executive’s taxable year next following the Executive’s
taxable year in which the related taxes are remitted to the taxing authority.
8. CONFIDENTIAL INFORMATION.
The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by the Executive during
the Executive’s employment by the Company or any of its affiliated companies, provided that it
shall not apply to information which is or shall become part of the public domain (other than by
acts by the Executive or representatives of the Executive in violation of this Agreement),
information that is developed by the Executive independently of such information, or knowledge or
data or information that is disclosed to the Executive by a third party under no obligation of
confidentiality to the Company. After termination of the Executive’s employment with the Company,
the Executive shall not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an asserted violation
of the provisions of this Section 8 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
9. SUCCESSORS.
(a) This Agreement is personal to the Executive and shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the
benefit of and be enforceable by the Executive’s legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
10. POST EMPLOYMENT NON-COMPETITION OBLIGATIONS.
(a) As part of the consideration for the compensation and benefits to be paid to Executive
hereunder, and as an additional incentive for the Company and NOI to enter into this Agreement,
the Company, NOI and Executive agree to the non-competition provisions of this Section 10.
Executive agrees that during the period of Executive’s non-competition obligations hereunder,
Executive will not, directly or indirectly for Executive or for others, in any geographic area or
market where the Company, NOI or any of their subsidiaries or affiliated companies are conducting
any business as of the date of termination of the employment relationship or have during the
previous twelve months conducted any business:
(i) engage in any business competitive with any line of business conducted by the Company,
NOI, or any of their subsidiaries or affiliates;
(ii) render advice or services to, or otherwise assist, any other person, association, or
entity who is engaged, directly or indirectly, in any business competitive with any line of
business conducted by the Company, NOI, or any of their subsidiaries or affiliates;
(iii) induce any officer or manager of the Company or NOI, or any of their subsidiaries or
affiliates to terminate his or her employment with the Company, NOI, or any of their subsidiaries
or affiliates, or hire or assist in the hiring of any such officer or manager by person,
association, or entity not affiliated with the Company, NOI or any of their subsidiaries or
affiliates.
These non-competition obligations shall apply during Executive’s employment and for a period
ending on the first (1st ) anniversary date of the Date of Termination. After termination of
Executive’s employment these non-competition obligations shall apply only to businesses having
annual revenues in excess of $10 million competitive with any line of business conducted by the
Company, NOI, or any of their subsidiaries having annual revenues in excess of $10 million for the
last fiscal year prior to the time of termination. If the Company, NOI, or any of their
subsidiaries or affiliates abandons a particular aspect of its business, that is, ceases such
aspect of its business with the intention to permanently refrain from such aspect of its business,
then this post-employment non-competition covenant shall not apply to such former aspect of that
business.
(b) Executive understands that the foregoing restrictions may limit his ability to engage in
certain businesses anywhere in the world during the period provided for above, but acknowledges
that Executive will receive sufficiently high remuneration and other benefits under this Agreement
to justify such restriction. Executive acknowledges that money damages would not be sufficient
remedy for any breach of this Section 10 by Executive, and the Company, NOI, or any of their
subsidiaries or affiliates shall be entitled to specific performance and injunctive relief as
remedies for such breach or any threatened breach after notification by the Company of any breach
and Executive’s failure to cure same. Such remedies shall not be deemed the exclusive remedies for
a breach of this Section 10, but shall be in addition to all remedies available at law or in equity
to the Company, NOI, or any of their subsidiaries or affiliates, including, without limitation, the
recovery of damages from Executive and his agents involved in such breach.
(c) The Executive, the Company and NOI each expressly acknowledge and agree that the
restrictions contained in this Agreement, including this Section 10, are deemed by each to
reasonable and necessary to protect the business interests of NOI and the Company and their
subsidiaries and affiliates. However, in the event that any of the restrictions contained in this
Agreement, and specifically this Section 10, are found by a court of competent jurisdiction to be
unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, it is the
parties express intention for the restrictions herein set forth to be modified by such court so as
to be reasonable and enforceable and, as so modified by the court, to be fully enforced.
11. 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 Executive: | If to Company: | ||
| Xxxxxx Xxxxxxxxx | National Oilwell Varco, L.P. | ||
| 0000 Xxxxxxxx Xxxx | X.X. Xxx 0000 | ||
| Xxxxxxxx, XX 00000 | Xxxxxxx, Xxxxx 00000-0000 | ||
| Attn: President | |||
| With copy to: | |||
| National Oilwell Varco, Inc. | |||
| 00000 Xxxxxxxx Xxx., Xxxxx 000 | |||
| Xxxxxxx, Xxxxx 00000 | |||
| Attn: Chief Financial Officer |
or to such other address as either party shall have furnished to the other in writing in
accordance herewith. Notices and communications shall be effective when actually received by
the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or
regulation.
(e) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or the Company may
have hereunder, including without limitation, the right of the Executive to terminate employment
for Good Reason pursuant to Section 3(c)(i)-(vi) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this Agreement.
(f) This Agreement is intended to meet the requirements of Section 409A of the Code and shall
be administered in a manner that is intended to meet those requirements and shall be construed and
interpreted in accordance with such intent. To the extent that a payment, or the settlement or
deferral thereof, is subject to Section 409A of the Code, except as the Board of Directors and
Executive otherwise determine in writing, the payment shall be paid, settled or deferred in a
manner that will meet the requirements of Section 409A of the Code, including regulations or other
guidance issued with respect thereto, such that the payment, settlement or deferral shall not be
subject to the additional tax or interest applicable under Section 409A of the Code. Any provision
of this Agreement that would cause the payment, settlement or deferral thereof to fail to satisfy
Section 409A of the Code shall be amended (in a manner that as closely as practicable achieves the
original intent of this Agreement) to comply with Section 409A of the Code on a timely basis, which
may be made on a retroactive basis, if permitted under the regulations and other guidance issued
under Section 409A of the Code. In the event additional regulations or other guidance is issued
under Section 409A of the Code or a court of competent jurisdiction provides additional authority
concerning the application of Section 409A with respect to the payments described hereunder, then
the provisions regarding such payments shall be amended to permit such payments to be made at the
earliest time allowed under such additional regulations, guidance or authority that is practicable
and achieves the original intent of this Agreement.
[SIGNATURE PAGE TO FOLLOW]
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.
| National Oilwell Varco, L.P. by its general partner NOW Oilfield Services, Inc. |
||||||
| By: | /s/ Xxxx Xxxxxxxx
|
|||||
| Name: Xxxx Xxxxxxxx | ||||||
| Title: President | ||||||
| National Oilwell Varco, Inc. | ||||||
| By: | /s/ Xxxxxxx X. Xxxxxx, Xx.
|
|||||
| Name: Xxxxxxx X. Xxxxxx, Xx. | ||||||
| Title: Chairman, President & Chief Executive Officer | ||||||
| Executive | ||||||
| /s/ Xxxxxx Xxxxxxxxx | ||||||
| Xxxxxx Xxxxxxxxx | ||||||
