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EXHIBIT 10.24
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (this "Agreement") is entered into and
deemed effective as of April __, 2000, by and between Grant Prideco, Inc., a
Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxx (the "Employee").
W I T N E S S E T H:
WHEREAS, the Employee has accepted an offer of employment with the
Company as Executive Vice President of Operations; and
WHEREAS, the terms of employment with the Company included an agreement
with the Employee that in the event there were to be a Change of Control (as
defined below) of the Company within three years from the date hereof, the
Employee would be entitled to certain enhanced severance benefits if the
employment of the Employee is terminated by the Company without Cause (as
defined below) or by the Employee for Good Reason (as defined below).
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) "Effective Date" shall mean the first date during the
Change of Control Period (as defined in Section 1(b)) on which a Change of
Control (as defined in Section 1(c)) occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Employee's
employment with the Company is terminated prior to the date on which the Change
of Control occurs, and if it is reasonably demonstrated by the Employee that
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period
commencing on the date hereof and ending on the third anniversary of the date
hereof; provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control 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 Employee that the Change of Control Period shall not be so extended.
(c) A "Change of Control" shall mean:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 50 percent or more of either (A) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a Change of
Control:
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(A) any acquisition directly from the
Company; or
(B) any acquisition by the Company; or
(C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company; or
(D) any acquisition by any corporation
pursuant to a transaction that complies with clauses (A), (B) and (C) of
subsection (iii) of this Section 1(c); or
(ii) Individuals, who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual was a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Corporate Transaction") in each case, unless,
following such Corporate Transaction, (A) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 60 percent of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction (including,
without limitation, a corporation that as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities, as the case
may be, (B) no Person (excluding any corporation resulting from such Corporate
Transaction or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Corporate Transaction) beneficially owns,
directly or indirectly, 20 percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Corporate Transaction and (C) at least a majority of the
members of the board of directors of the corporation resulting from such
Corporate Transaction were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Corporate Transaction; or
(iv) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(d) "Board" shall mean the Board of Directors of the Company.
2. Employment Period. The Company hereby agrees that the Company or an
affiliated company will continue the Employee in its employ, and the Employee
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the second anniversary of such date (the
"Employment Period").
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3. Terms of Employment.
(a) Position and Duties. During the Employment Period, (i) the
Employee's position shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned at any time during
the 120-day period immediately preceding the Effective Date and (ii) the
Employee's services shall be performed at the Company's principal executive
offices in The Woodlands, Texas or other locations less than 50 miles from such
principal executive offices or the Company's facilities in Navasota, Texas or
other locations less than 35 miles from such facilities.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Employee shall receive an annual base salary ("Annual Base Salary") at
least equal to the annual base salary payable to the Employee by the
Company and/or its affiliated companies immediately preceding the
Effective Date; provided, however, that notwithstanding the foregoing,
the Employee's Annual Base Salary shall be subject to any company-wide
salary reduction that takes effect during the Employment Period. During
the Employment Period, the Annual Base Salary shall be reviewed from
time to time on the same basis as similarly situated employees;
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 Employee
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 Employee 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 key employees under
the Company's annual incentive programs.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs applicable generally to the Employee's peer key employees of
the Company and its affiliated companies. 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 Employee and/or the Employee'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 Employee's peer key employees of the Company and its
affiliated companies.
(v) Fringe Benefits. During the Employment Period,
the Employee shall be entitled to (A) payment of professional
association dues, payment of state professional taxes and a car
allowance and (B) such other fringe benefits as in effect generally at
any time thereafter with respect to the Employee's peer key employees
of the Company and its affiliated companies.
(vi) Vacation. During the Employment Period, the
Employee shall be entitled to at least three weeks paid vacation or
such greater amount of paid vacation as may be applicable to the
Employee's peer key employees of the Company and its affiliated
companies.
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(vii) Deferred Compensation Plan. During the
Employment Period, the Employee shall be entitled to continue to
participate in any deferred compensation or similar plans in which the
Employee was participating in prior to the Employment Period subject to
such changes thereto as may be necessary to reflect the effect of the
Change of Control.
4. Termination of Employment.
(a) Death or Disability. The Employee's employment shall
terminate automatically upon the Employee's death during the Employment Period.
If the Company determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Employee written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee'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 that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Employee or the
Employee's legal representative.
(b) Cause. The Company may terminate the Employee's employment
during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
(i) the failure of the Employee to perform the
Employee'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 Employee by the
Company that specifically identifies the manner in which the Employee has not
performed the Employee's duties;
(ii) the engaging by the Employee in illegal conduct
or misconduct that is materially and demonstrably injurious to the Company;
(iii) the conviction of the Employee of a crime
involving moral turpitude;
(iv) the misappropriation by the Employee of funds of
the Company or one of the its affiliates;
(v) the disparagement by the Employee of the Company
or one of its affiliates or of management thereof; or
(vi) any conduct that is materially detrimental to
the Company as determined in good faith by the Board of Directors of the
Company, so long as the Employee has received prior written notice that such
conduct is materially detrimental to the Company and will be grounds for
termination for "cause".
For purposes of this provision, no act, or failure to act, on
the part of the Employee shall be considered "willful" unless it is done, or
omitted to be done, by the Employee in bad faith or without reasonable belief
that the Employee'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 Employee in good faith and in the best interests of the Company.
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(c) Good Reason. The Employee's employment may be terminated
by the Employee during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities as contemplated by Section 3(a) of this Agreement,
or any other action by the Company that 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 that is remedied by the Company promptly after receipt of
notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and that is remedied by the Company promptly after receipt of
notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be
based at any office or location other than as provided in Section
3(a)(ii) hereof or the Company's requiring the Employee to travel on
Company business to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement.
For purposes of this Section 4(c), any good faith
determination of "Good Reason" made by the Employee shall be conclusive.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Employee 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 that (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 Employee'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, in the case of a notice by the Company, shall be
not more than 30 days after the giving of such notice). The failure by the
Employee or the Company to set forth in the Notice of Termination any fact or
circumstance that contributes to a showing of Good Reason or Cause shall not
waive any right of the Employee or the Company, respectively, from asserting
such fact or circumstance in enforcing the Employee's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Employee's employment is terminated by the
Company for Cause, or by the Employee 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 Employee'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
Employee of such termination; and
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(iii) if the Employee's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of the Employee or the Disability Effective Date, as the
case may be.
5. Obligations of the Company Upon Termination.
(a) Good Reason; Other than For Cause, Death or Disability.
If, during the Employment Period, the Company terminates the Employee's
employment other than for Cause, death or Disability, or the Employee terminates
employment for Good Reason:
(i) The Company shall pay to the Employee 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 Employee'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 Employee over the
preceding three year period and (II) the Annual Bonus that
would be payable in respect of the current fiscal year, if any
(such higher amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365, and (3) any
compensation previously deferred by the Employee 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 two times the sum of
(i) the then current Annual Base Salary of the Employee and
(ii) the Highest Annual Bonus; and
(C) an amount equal to the total of the
employer basic and matching contributions credited to the
Employee under the Company's 401(k) Savings Plan (the "401(k)
Plan") and any other deferred compensation plan during the
12-month period immediately preceding the month of the
Employee's Date of Termination multiplied by two, such amount
to be grossed up so that the amount the Employee actually
receives after payment of any federal or state taxes payable
thereon equals the amount first described above; and
(D) an amount equal to two times the total
amount of all fringe benefits received by Employee on an
annualized basis.
(ii) For a period of two years from the Employee's
Date of Termination 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 Employee and/or the Employee's family
equal to those that would have been provided to them in accordance with
the plans, programs, practices and policies described in Section
3(b)(iv) of this Agreement if the Employee'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
Employee shall continue to pay the monthly employee contribution for
same, and provided further, that if the Employee 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;
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(iii) All benefits and amounts under the Company's
deferred compensation plan and the 401(k) Plan and any other similar
plans, including any stock options held by the Employee, not already
vested shall be 100% vested;
(iv) To the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Employee any other
amounts or benefits required to be paid or provided or that the
Employee 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
(v) The foregoing payments are intended to compensate
the Employee for a breach of the Company's obligations and place
Employee in substantially the same position had the employment of the
Employee not been so terminated as a result of a breach by the Company.
The payments shall be in lieu of any other severance payments that
might be due to the Employee under the Company's severance and other
similar plans.
(b) Death. If Employee's employment is terminated by reason of
the Employee's death during the Employment Period, this Agreement shall
terminate without further obligations to the Employee'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 Employee's estate or beneficiaries, as applicable, in a lump sum in cash
within 30 days after the Date of Termination.
(c) Disability. If the Employee's employment is terminated by
reason of the Employee's Disability during the Employment Period, this Agreement
shall terminate without further obligations to the Employee, other than for
payment of Accrued Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Employee in a lump sum in
cash within 30 days after the Date of Termination.
(d) Cause; Other Than for Good Reason. If the Employee's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Employee under this
Agreement, other than the obligation to pay to the Employee (x) his or her
Annual Base Salary through the Date of Termination, (y) the amount of any
compensation previously deferred by the Employee, and (z) Other Benefits, in
each case to the extent theretofore unpaid. If the Employee voluntarily
terminates employment during the Employment Period, excluding a termination for
Good Reason, this Agreement shall terminate without further obligations to the
Employee under this Agreement, 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 Employee 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.
6. Other Rights. Except as provided hereinafter, nothing in this
Agreement shall prevent or limit the Employee'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 Employee may qualify, nor
shall anything herein limit or otherwise affect such rights as the Employee may
have under any contract or agreement with the Company or any of its affiliated
companies. Except as provided hereinafter, amounts that are vested benefits or
that the Employee 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 Employee 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. In addition, if the Employee has an employment or similar agreement
with the Company at the Date of Termination, he or she agrees that he or she
shall have the right to receive all of the
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benefits provided under this Agreement or such other agreement, whichever one,
in its entirety, the Employee chooses, but not both agreements, and when the
Employee has made such election, the other agreement shall be superseded in its
entirety and shall be of no further force and effect. The Employee 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 Employee shall not receive duplicate benefits.
7. 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 that the Company may have against the
Employee or others.
(b) No Mitigation Required. In no event shall the Employee be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Employee under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Employee
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expenses that the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Employee 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 Employee 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").
8. Certain Additional Payments by the Company.
(a) 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 Employee
(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 8) (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 Employee 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 Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Employee 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 Employee retains an amount of the
Gross- Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 8(a), if it shall be
determined that the Employee is entitled to a Gross-Up Payment, but that the
Employee, 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 Employee 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 Employee and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up
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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 Employee (the "Accounting
Firm"), which shall provide detailed supporting calculations both to the Company
and the Employee within 15 business days after the receipt of notice from the
Employee 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
Employee 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 8, shall be paid by the Company to the Employee 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
Employee. 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 that 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 8(c) and the Employee 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
Employee.
(c) The Employee 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
Employee 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 Employee 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 Employee in writing
prior to the expiration of such period that it desires to contest such claim,
the Employee 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 to effectively 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 Employee 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 8(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 Employee to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the Employee 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,
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that if the Company directs the Employee to pay such claim and xxx for
a refund, the Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify and hold the
Employee 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 Employee 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 Employee 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 Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of Section 8(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
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee 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.
9. Confidential Information. The Employee 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, that shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies, provided that it shall not apply to information that is or shall
become public knowledge (other than by acts by the Employee or representatives
of the Employee in violation of this Agreement), information that is developed
by the Employee independently of such information, or knowledge or data or
information that is disclosed to the Employee by a third party under no
obligation of confidentiality to the Company. After termination of the
Employee's employment with the Company, the Employee 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 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement.
10. Successors.
(a) This Agreement is personal to the Employee and shall not
be assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Employee'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 (i) 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 and (ii) issue to the Employee substantially similar options to
purchase shares of equity in such successor in replacement of options held by
the Employee to purchase shares of common stock of the Company. As used in this
Agreement, "Company"
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shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law, or otherwise.
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 the Employee: Xxxxxxx X.Xxxxx
---------------------
---------------------
If to the Company: Grant Prideco, Inc.
0000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxxxx, 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 Employee'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 Employee or the Company may have hereunder, including without
limitation, the right of the Employee to terminate employment for Good Reason
pursuant to Section 4(c)(i)-(v) 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.
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
-----------------------------------
Xxxxxxx X. Xxxxx
GRANT PRIDECO, INC.
By
---------------------------------
Name:
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Title:
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