EXHIBIT 10.12
EXECUTIVE AGREEMENT
This Executive Agreement (this "Agreement") is made and entered into as of
the 25th day of June, 1997 (the "Effective Date") between Tuboscope Inc., a
Delaware corporation and its subsidiaries (collectively "Tuboscope") and Xxxx X.
Xxxxxxxx (the "Executive").
WHEREAS, the Executive is employed as an Executive Officer or Senior Manager of
Tuboscope; and
WHEREAS, the Board of Directors of the Company has authorized certain "Severance
and Change of Control Severance Protections" in order to retain and motivate
management and to ensure continuity of management; and
WHEREAS, Tuboscope believes it to be in the best interests of its stockholders
to attract, retain and motivate key executive officers and ensure continuity of
management; and
WHEREAS, it is in the best interest of Tuboscope and its stockholders if the key
executive officers can approach material business development decisions
objectively and without concern for their personal situation;
WHEREAS, Tuboscope recognizes that the possibility of a Change of Control of the
Corporation may result in the departure of key executives to the detriment of
Tuboscope and its stockholders;
In consideration of Executive's continued employment as an executive
officer with Tuboscope and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Tuboscope and
Executive agree as follows:
1. Term of Agreement
A. This Agreement shall commence on the Effective Date and shall continue
in effect, unless terminated earlier as otherwise set forth herein
through December 31, 2002; provided, however, that unless so terminated
earlier, the term of this Agreement shall automatically be extended for
one or more additional terms of three (3) years; provided, however, this
Agreement may be terminated at any time after the expiration of the
original term upon Tuboscope providing three (3) years written notice to
the Executive.
B. The term of this Agreement shall terminate upon the expiration of the
"Severance Payout Period" or "Change in Control Payout Period", as
applicable, and all rights or benefits thereunder have been satisfied.
2. Certain Definitions
A. "Cause". "Cause" shall mean:
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(i) Executive's conviction of a felony involving moral turpitude,
dishonesty or a breach of trust as regards Tuboscope;
(ii) Executive's commission of any act of theft, fraud, embezzlement
or misappropriation against Tuboscope that is materially
injurious to it regardless of whether a criminal conviction is
obtained;
(iii) Executive's willful and continued failure to devote substantially
all of his business time to the Corporation's business affairs
(excluding failures due to illness, incapacity, vacations,
incidental civic activities and incidental personal time) which
failure is not remedied within a reasonable time after written
demand is delivered by the Corporation, which demand specifically
identifies the manner in which the Corporation, believes that
Executive has failed to devote substantially all of his business
time to the Corporation's business affairs; or
(iv) Executive's unauthorized disclosure of confidential information
of Tuboscope that is materially injurious to Tuboscope.
For purposes of this definition, no act, or failure to act, on Executive's
part shall be deemed "willful" unless done, or omitted to be done, by Executive
not in good faith and without reasonable belief that Executive's action or
omission was in the best interest of Tuboscope.
B. "Date of Termination" shall mean the date specified in the Notice of
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Termination relating to termination of Executive's employment with
Tuboscope; provided that such date shall not be less than 20 days nor
more than 45 days following: (i) involuntary termination, not for
cause, pursuant to Section 4 hereof, or (ii) the date within the
Protective Period that Executive voluntarily terminates his employment
for good reason so governed by Section 5 hereof.
C. "Executive Officer" shall mean an officer of the Company who is both a
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named executive officer of Tuboscope and a member of the Senior
Management Team ("SMT").
D. "Good Reason" shall mean:
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(i) failure to re-elect or appoint the Executive to any corporate
office or directorship held at the time of the Change of Control
or a material reduction in Executive's authority, duties or
responsibilities (including status, offices, titles and reporting
requirements) or if Executive is assigned duties or
responsibilities inconsistent in any material respect from those
of Executive at the time of the relevant Change in Control all on
the
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basis of which Executive makes a good faith determination that
the terms of his employment have been detrimentally and
materially affected.
(ii) a material reduction of Executive's compensation or benefits,
including annual base salary, annual bonus, intermediate or long-
term cash or equity incentive opportunities or plans from those
in effect prior to the Change in Control;
(iii) the Company fails to obtain a written agreement satisfactory to
Executive from any successor or assigns of the Company to assume
and perform this Agreement as provided in Section 9 hereof;
(iv) the Company requires Executive to be based at any office located
more than fifty (50) miles from the Company's current offices
without Executive's consent.
E. "Notice of Termination" shall mean a written notice delivered to the
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other party indicating the specific termination provision in this
Agreement relied upon for termination of Executive's employment and
shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment
under the provision so indicated.
F. "Option Plans" shall mean the Corporation's stock option plans,
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incentive plans, equity participation plans, or other similar plans,
and any stock option agreements or other agreements used in connection
therewith.
G. "Senior Manager" shall mean a member of the SMT who is not an Executive
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Officer of the Company.
H. "Termination Base Salary" shall mean Executive's base salary at the
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rate in effect at the time the Notice of Termination is given or, for
purposes of a Change of Control, if a greater amount, Executive's base
salary at the rate in effect immediately prior to the Change of
Control.
3. Termination for Cause. Tuboscope may terminate Executive for Cause at any
time, including following a Change of Control, upon written notice to Executive.
4. Standard Severance Plan. If Executive is terminated involuntarily (i.e.,
without the consent of Executive) by Tuboscope for any reason other than for
Cause (and such termination is not pursuant to a Change of Control) the
Executive shall receive the following compensation and benefits from Tuboscope:
A. Tuboscope shall pay to Executive when otherwise due Executive's
Termination Base Salary through the Date of Termination.
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B. Effective as of the Date of Termination, Tuboscope shall continue to pay
to Executive (the "Severance Pay") the Termination Base Salary, payable
on a regular payroll basis, for a period of twenty-four (24) months
following the Date of Termination (such period to be herein referred to
as the "Severance Payout Period"), subject to reduction as follows:
(i) If Executive is re-employed during the Severance Payout Period,
Executive shall receive throughout the remainder of the Severance
Payout Period following the effective date of such re-employment,
50% of the Severance Pay otherwise due and payable to Executive
after such date of re-employment;
(ii) In addition, if Executive is re-employed during the Severance
Payout Period at an annual base salary that is less than the
Termination Base Salary, in addition to the payment required by
clause (i) above, Executive shall receive on a monthly basis
throughout the remainder of the Severance Payout Period following
the effective date of such re-employment the difference between (x)
the salary actually received by Executive on a monthly basis from
such re-employment and (y) the Termination Base Salary expressed as
a monthly payment.
C. Bonuses.
(i) Tuboscope shall pay to Executive the "target EV" (i.e., sixty
percent (60%) of Executive's Termination Base Salary) of the
annual bonus under the Corporation's "Annual Management Incentive
Program" or a similar or successor plan for the year in which the
Date of Termination occurred if Executive had not been so
terminated.
(ii) Tuboscope shall pay to Executive any awards earned under the
Company's "Value Plan", or a similar or successor long-term
incentive plan adopted after the Effective Date, calculated
through the last completed quarter prior to the Date of
Termination, that Executive would have been entitled to receive
for such period if Executive had not been so terminated.
(iii) All amounts due to Executive under this Section 4.C are due and
payable on the normal distribution date for such bonuses for all
other participants.
D. All restricted shares and restricted stock units (including those under
the Stock Match Program) of Executive shall be and become 100% vested
and all restrictions thereon shall lapse as of the Date of Termination
and the Corporation shall promptly deliver such shares to Executive;
provided the Executive may elect to take a portion of the total shares
on an annual basis for a maximum of five (5) years.
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5. Change in Control Severance Plan. In the event that within the "Protective
Period" (24 months following the Effective Date of a Change of Control)
either (a) Executive voluntarily terminates employment for Good Reason or
(b) Tuboscope terminates Executive's employment other than for Cause, the
Executive shall receive the following compensation and benefits from
Tuboscope:
A. Tuboscope shall pay to Executive when otherwise due Executive's
Termination Base Salary through the Date of Termination.
B. Effective as of the Date of Termination, Tuboscope shall continue to pay
to Executive the Termination Base Salary, payable on a regular payroll
basis, for a period of thirty-six (36) months following the Date
Termination (such period to be herein referred to as the "Change in
Control Payout Period").
C. Effective as of the Date of Termination, Tuboscope shall pay to
Executive an amount equal to three (3) times (i.e., the 36 months set
forth in B above) sixty percent (60%) of Executive's Termination Base
Salary ("Target EV") as payment for the "Annual Management Incentive
Program". Payment shall be made in installments consistent with payment
of the Executive's Termination Base Salary on a regular payroll basis.
D. Effective as of the Date of Termination, the performance awards for all
overlapping periods of the Value Plan vest. For the year in which the
Change of Control occurs, a full year is assumed to be completed for
each performance period and included in the payoff calculations. Payout
is prorated based on the number of deemed completed years in the
performance periods. Payment is payable on the normal distribution date
for such bonuses for all other participants.
E. All restricted shares and restricted stock units (including those under the
Stock Match Program) of Executive shall be and become 100% vested and all
restrictions thereon shall lapse as of the Date of Termination and the
Corporation shall promptly deliver such shares to Executive; provided the
Executive may elect
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to take a portion of the total shares on an annual basis for a maximum of
five (5) years.
F. Executive shall become and be fully vested in Executive's accrued benefits
under all qualified pension, nonqualified pension, profit sharing, 401(k),
deferred compensation and supplemental plans maintained by Tuboscope for
Executive's benefit, except to that the extent that the acceleration of
vesting of such benefits would violate any applicable law or require
Tuboscope to accelerate the vesting of the accrued benefits of all
participants in such plan or plans, in which case Tuboscope shall pay
Executive a lump sum payment, within 30 days following the Date of
Termination, in an amount equal to the present value of such unvested
accrued benefits. In addition, if such a lump sum payment is payable,
Tuboscope shall make an additional gross-up payment to Executive in an
amount such that the net amount of the lump sum payment and such additional
gross-up payment retained by Executive, after the calculation and deduction
of all federal, state and local income tax and employment tax (including any
interest or penalties imposed with respect to such taxes) on such lump sum
payment and additional gross-up payment, and taking into account any lost or
reduced tax deductions on account of such gross-up payment, shall be equal
to such lump sum payment.
6. Additional Benefits.
A. For the term of the Severance Payout Period or Change in Control Payout
Period, as applicable, Tuboscope shall continue to provide Executive and
Executive's eligible family members, based on the cost sharing
arrangement between Executive and Tuboscope on the Date of Termination,
with medical and dental health benefits and disability coverage and
benefits at least equal to those which would have been provided to
Executive if Executive's employment had not been terminated or, if more
favorable to Executive, as in effect generally at any time during such
Severance Payout Period or Change in Control period, as applicable.
Notwithstanding the foregoing, if Executive becomes re-employed and is
eligible to receive medical, dental and disability benefits under
another employer's plans, Tuboscope's obligations under this Section 6A
shall be reduced to the extent comparable benefits are actually received
by Executive during the Severance Payout Period or Change in Control
Payout Period, as applicable, and any such benefits actually received by
Executive shall be promptly reported by Executive to Tuboscope. In the
event Executive is ineligible under the terms of Tuboscope's benefit
plans or programs to continue to be so covered, Tuboscope shall provide
Executive with substantially equivalent coverage through other sources
or will provide Executive with a lump sum payment in such amount that,
after all taxes on that amount, shall be equal to the cost to Executive
of providing Executive such benefit coverage. The lump sum shall be
determined on a present value basis using the interest rate provided in
Section 1274(b)(2)(B) of the Internal Revenue Code of 1986, as amended
(the "Code") on the Date of Termination. In addition, if such a lump sum
payment is payable, Tuboscope shall make an
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additional gross-up payment to Executive in an amount such that the net
amount of the lump sums payment and such additional gross-up payment
retained by Executive, after the calculation and deduction of all
federal, state and local income tax and employment tax (including any
interest or penalties imposed with respect to such taxes) on such lump
sum payment and additional gross-up payment, and taking into account any
lost or reduced tax deductions on account of such gross-up payment,
shall be equal to such lump sum payment.
B. Outplacement Benefits. Throughout the term of the Severance Payout
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Period or Change in Control Payout Period, as applicable, Executive
shall be entitled to receive outplacement services, payable by
Tuboscope, with an aggregate cost not to exceed 15% of Executive's
Termination Base Salary, with an executive outplacement service firm
reasonably acceptable to Tuboscope and Executive.
C. Automobile Benefits. Throughout the Severance Payout Period or Change
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in Control Payout Period, as applicable, Tuboscope shall continue to pay
to Executive the monthly car allowance payable to Executive as of the
Date of Termination, payable on the regular payroll basis in effect for
car allowances.
7. Accelerated Vesting of Options Upon a Change of Control.
Notwithstanding any provisions to the contrary of any of the Option Plans or
Option Agreements, upon a Change in Control all outstanding unvested stock
options, if any, granted to Executive under any of the Option Plans (or
options substituted therefor covering the stock of a successor corporation)
shall be and become fully vested and exercisable as to all shares of stock
covered thereby effective as of the date of the Change in Control.
8. Mitigation.
Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise nor,
except as provided in Section 4B and Section 6A, shall the amount of any
payment or benefit provided for in this Agreement be reduced by any
compensation earned or benefit received by Executive as the result of
employment by another employer or self-employment, by retirement benefits,
by offset against any amount claimed to be owed by Executive to Tuboscope or
otherwise.
9. Successor Agreement.
Tuboscope 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 Tuboscope to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Companies would be required to perform if no succession had taken place.
Failure of the successor to so assume shall constitute a breach of this
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Agreement and entitle Executive to the benefits hereunder as if triggered
by a termination not for good cause.
10. Indemnity.
In any situation where under applicable law Tuboscope has the power to
indemnify, advance expenses to and defend Executive in respect of any
judgements, fines, settlements, loss, cost or expense (including attorneys
fees) of any nature related to or arising out of Executive's activities as
an agent, employee, officer or director of Tuboscope or in any other
capacity on behalf of or at the request of Tuboscope, then Tuboscope shall
promptly on written request, indemnify Executive, advance expenses
(including attorney's fees) to Executive and defend Executive to the
fullest extent permitted by applicable law, including but not limited to
making such findings and determinations and taking any and all such actions
as Tuboscope may, under applicable law, be permitted to have the discretion
to take so as to effectuate such indemnification, advancement or defense.
Such agreement by Tuboscope shall not be deemed to impair any other
obligation of Tuboscope respecting Executive's indemnification or defense
otherwise arising out of this or any other agreement or promise of
Tuboscope under any statute.
11. Notice.
For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and delivered by United
States certified or registered mail (return receipt requested, postage
prepaid) or by courier guaranteeing overnight delivery or by hand delivery
(with signed receipt required), addressed to the respective addresses set
forth below, and such notice or communication shall be deemed to have been
duly given two days after deposit in the mail, one day after deposit with
such overnight carrier or upon delivery with hand delivery. The addresses
set forth below may be changed by a writing in accordance herewith.
Tuboscope: Executive:
Tuboscope, Inc. Xxxx X. Xxxxxxxx
0000 Xxxxxx Xxxx 000 Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000 Xxxxxx Xxxx, Xxxxx 00000
Attn: Chief Executive Officer
with a copy to General Counsel
12. Dispute Resolution.
If any dispute arises out of this Agreement, the "complaining party" shall
give the "other party" written notice of such dispute. The other party
shall have ten (10) business days to resolve the dispute to the complaining
party's satisfaction. If the dispute is not resolved by the end of such
period, the complaining party may by written notice (the "Notice")
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demand arbitration of the dispute as set out below, and each party hereto
expressly agrees to submit to, and be bound by, such arbitration.
(a) Each party will, within ten (10) business days of the Notice, nominate
an arbitrator. Each nominated arbitrator must be someone experienced
in dispute resolution and of good character without moral turpitude
and not within the employ or direct or indirect influence of the
nominating party. The two nominated arbitrators will, within ten (10)
business days of nomination, agree upon a third arbitrator. If two
(2) appointed arbitrators cannot agree on a third arbitrator within
such period, the parties may seek such an appointment through any
permitted court proceeding or by the American Arbitration Association
("AAA"). The three arbitrators will set the rules and timing of the
arbitration, but will generally follow the rules of the AAA and this
Agreement where same are applicable and shall provide for written fact
findings.
(b) The arbitration hearing will in no event take place more than ninety
(90) days after the appointment of the third arbitrator.
(c) The arbitration will take place in Houston, Texas unless otherwise
unanimously agreed to by the parties.
(d) The results of the arbitration and the decision of the arbitrators
will be final and binding on the parties and each party agrees and
acknowledges that these results shall be enforceable in a court of
law.
13. Governing Law.
This Agreement will be governed by and construed in accordance with the
internal substantive laws, and not the choice of law rules, of the State of
Texas.
IN WITNESS WHEREOF, Tuboscope and the Executive have executed this
Amendment to be effective the date first above written.
EXECUTIVE TUBOSCOPE INC.,
a Delaware corporation
/s/ XXXX X. XXXXXXXX BY /s/ XXXXXX X. XXXXXXX
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Xxxx X. Xxxxxxxx Xxxxxx X. Xxxxxxx
Executive Vice President and
Chief Financial Officer
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