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EXHIBIT 10.23
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") by and between Grant Prideco,
Inc., a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxx (the
"Executive"), is effective as of April __, 2000.
W I T N E S S E T H:
WHEREAS, concurrent with the date hereof, the Executive is terminating the
Employment Agreement dated March 16, 1998 between the Executive and EVI, Inc.;
WHEREAS, the Board of Directors of the Company (the "Board") has previously
determined that it is in the best interests of the Company and its stockholders
to retain the Executive and to induce the employment of the Executive for the
long term benefit of the Company;
WHEREAS, the Board does not contemplate the termination of the Executive
during the term hereof and the Board and the Executive expect that the Executive
will be retained for at least the three year period contemplated herein; and
WHEREAS, to accomplish these objectives, the Board has caused the Company
to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment.
(a) The Company hereby agrees that the Company or an affiliated company
will continue the Executive in its employ, and the Executive hereby agrees to
remain in the employ of the Company or an affiliate subject to the terms and
conditions of this Agreement, during the Employment Period (as defined below).
(b) The "Employment Period" shall mean the period commencing on the
date hereof 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 Employment Period shall be automatically extended so as to
terminate three years after such Renewal Date, unless at least 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
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responsibilities) shall be Vice President and Chief Financial Officer of
the Company and such other executive positions as may be assigned to her
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 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 reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use
the Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it shall
not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the date
hereof, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the date
hereof shall not thereafter be deemed to interfere with the performance of
the Executive's responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Executive shall
receive an annual base salary of $225,000 ("Annual Base Salary"), which
shall be paid at a monthly rate. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the date hereof and thereafter
at least annually; provided, however, that a salary increase shall not
necessarily be awarded as a result of such review. Any increase in Annual
Base Salary may not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be reduced
after any such increase. The term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. The Executive shall be eligible for an annual
bonus (the "Annual Bonus") for each fiscal year ending during the
Employment Period on the same basis as other executive officers under the
Company's executive officer annual incentive program. Each such Annual
Bonus shall be paid no later than the end of the third month of the fiscal
year next following the fiscal year for which the Annual Bonus is awarded,
unless the Executive shall elect to defer the receipt of such Annual Bonus
pursuant to a Company sponsored deferred compensation plan in effect.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to the 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
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(measured with respect to both regular and special incentive opportunities,
to the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case, less
favorable, in the aggregate, than the most favorable of those provided by
the Company and its affiliated companies for the Executive under such
plans, practices, policies and programs as in effect on the date hereof. As
used in this Agreement, the term "affiliated companies" shall include any
company controlled by, controlling or under common control with the
Company.
(iv) Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be
eligible to participate in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and
its affiliated companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group
life, accidental death and travel accident insurance plans and programs) to
the extent applicable generally to the Executive's peer executives of the
Company and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with benefits that
are less favorable, in the aggregate, than such plans, practices, policies
and programs in effect for the Executive on the date hereof.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and its affiliated companies in
effect for the Executive on the date hereof.
(vi) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits (including, without limitation,
financial planning services, payment of club dues, a car allowance 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.
(viii) Options. Effective as of the date hereof, the Executive
shall receive options under the Company's stock option plan to purchase an
aggregate of 100,000 shares of Common Stock, $.01 par value, of the Company
("Common Stock"), at an exercise price per share equal to the closing sale
price of a share of Common Stock on the date hereof, such options to be
subject to three year cliff vesting, subject to acceleration in the event
of change of control of the Company or a termination of employment of the
Executive by the Company without Cause or by the Executive for Good Reason.
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3. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If the
Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 10(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Executive (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Executive from the Executive's duties with the Company on a
full-time basis for 180 calendar days as a result of incapacity due to mental or
physical illness that 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 that 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 that 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. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
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(c) Good Reason. The Executive's employment may be terminated by the
Executive during the Employment Period for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices,
titles and reporting requirements), authority, duties or responsibilities
as contemplated by Section 2(a) of this Agreement, or any other action by
the Company 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 Executive;
(ii) 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 that results in a diminution in such position, authority,
duties or responsibilities, if there were to occur a merger, consolidation
or other business combination involving the Company where the Company
ceases to be publicly traded and following the transaction the Executive
does not have the status, office, title and reporting requirements at the
ultimate parent company that are substantially similar to that which the
Executive has with the Company;
(iii) 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 that
is remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(iv) 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;
(v) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(vi) any failure by the Company to comply with and satisfy Section
9(c) of this Agreement.
For purposes of this Section 3(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination during the Employment Period
by the Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 10(b) of the Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice that (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth
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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 that 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.
4. Obligations of the Company Upon Termination.
(a) Good Reason; Other than For Cause, Death or Disability. If, during
the Employment Period, the Company shall terminate the Executive's employment
other than for Cause, death or Disability, or the Executive shall terminate
employment for Good Reason:
(i) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(A) the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the highest Annual Bonus received by
the Executive over the preceding three year period (for purposes of
determining any bonuses paid during any preceding year, bonuses paid by
Xxxxxxxxxxx International, Inc. shall be taken into account) and (II)
the Annual Bonus paid or payable, including any bonus or portion
thereof that 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 (for
purposes of determining any bonuses paid during any preceding year,
bonuses paid by Xxxxxxxxxxx International, Inc. shall be taken into
account), 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
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previously deferred by the Executive under a plan sponsored by the
Company (together with any accrued interest or earnings thereon), and
any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2) and (3)
shall be hereinafter referred to as the "Accrued Obligations"), and
(B) an amount equal to three times the sum of (i) the then
current Annual Base Salary of the Executive and (ii) the Highest Annual
Bonus, and
(C) an amount equal to the total of the employer matching
contributions credited to the Executive under the Company's 401(k)
Savings Plan (the "401(k) Plan") or any other deferred compensation
plan during the 12-month period immediately preceding the month of the
Executive's Date of Termination multiplied by three, such amount to be
grossed up so that the amount the Executive actually receives after
payment of any federal or state taxes payable thereon equals the amount
first described above.
(ii) For a period of three years from the Executive's Date of
Termination (the "Remaining Contract Term") or such longer period as may be
provided by the terms of the appropriate plan, program, practice or policy,
the Company shall continue benefits to the Executive and/or the Executive's
family equal to those that would have been provided to them in accordance
with the plans, programs, practices and policies described in Section
2(b)(iv) of this Agreement if the Executive's employment had not been
terminated; provided, however, that with respect to any of such plans,
programs, practices or policies requiring an employee contribution, the
Executive shall continue to pay the monthly employee contribution for same,
and provided further, that if the Executive becomes reemployed by another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility;
(iii) The Company shall, at its sole expense as incurred, provide
the Executive with outplacement services, the scope and provider of which
shall be selected by the Executive in his sole discretion;
(iv) With respect to all options to purchase Common Stock, $.01 par
value, of the Company ("Common Stock"), held by the Executive pursuant to a
Company stock option plan on or prior to the Date of Termination,
irrespective of whether such options are then exercisable, the Executive
shall have the right, during the 60-day period after the Date of
Termination, to elect to surrender all or part of such options in exchange
for a cash payment by the Company to the Executive in an amount equal the
number of shares of Common Stock subject to the Executive's option
multiplied by the difference between (x) and (y) where (x) equals the
purchase price per share covered by the option and (y) equals the highest
reported sale price of a share of Common Stock in any transaction reported
on the New York Stock Exchange during the 60-day period prior to and
including the Executive's Date of Termination. Such cash payments shall be
made within 30 days after
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the date of the Executive's election; provided, however, that if the
Executive's Date of Termination is within six months after the date of
grant of a particular option held by the Executive and the Executive is
subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended, any cash payments related thereto shall be made on the date that
is six months and one day after the date of grant of such option to the
extent necessary to prevent the imposition of the disgorgement provisions
under Section 16(b). Notwithstanding the foregoing, if any right granted
pursuant to the foregoing would make any change of control transaction
ineligible for pooling of interests accounting treatment under XXX Xx. 00
that but for this Section 4(a)(iv) would otherwise be eligible for such
accounting treatment, the Executive shall receive shares of Common Stock
with a Fair Market Value equal to the cash that would otherwise be payable
hereunder in substitution for the cash, provided that any such shares of
Common Stock so granted to the Executive shall be registered under the
Securities Act of 1933, as amended; any options outstanding as of the Date
of Termination or upon a change of control and not then exercisable shall
become fully exercisable as of the Executive's Date of Termination, and to
the extent the Executive does not elect to surrender same for a cash
payment (or the equivalent number of shares of Common Stock) as provided
above, such options shall remain exercisable for one year after the
Executive's Date of Termination or until the stated expiration of the
stated term thereof, whichever is longer; restrictions applicable to any
shares of Common Stock granted to the Executive by the Company shall lapse,
as of the date of the Executive's Date of Termination;
(v) All country club memberships, luncheon clubs and other
memberships that the Company was providing for the Executive's use at the
time Notice of Termination is given shall, to the extent possible, be
transferred and assigned to the Executive at no cost to the Executive
(other than income taxes owed), the cost of transfer, if any, to be borne
by the Company;
(vi) The Company shall either transfer to the Executive ownership
and title to the Executive's company car at no cost to the Executive (other
than income taxes owed) or, if the Executive receives a monthly car
allowance in lieu of a Company car, pay the Executive a lump sum in cash
within 30 days after the Executive's Date of Termination equal to the
Executive's annual car allowance multiplied by three;
(vii) All benefits under the Company's Executive Deferred
Compensation Plan and the 401(k) Plan and any other similar plans,
including any stock options or restricted stock held by the Executive, not
already vested shall be 100% vested, to the extent such vesting is
permitted under the Code (as defined below);
(viii) 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 that 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
(ix) 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
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had the employment of the Executive not been so terminated as a result of a
breach by the Company.
(b) Death. If Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiaries, as applicable, in a lump sum in cash within
30 days after the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 4(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of the Executive's peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating
to death benefits, if any, in effect on the date hereof or, if more favorable,
those in effect on the date of the Executive's death.
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days after the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 4(c) shall
include, without limitation, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable benefits generally provided by the Company and its
affiliated companies to the Executive's disabled peer executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, in effect generally on the date hereof or, if
more favorable, those in effect at the time of the Disability.
(d) Cause; Other Than for Good Reason. If the Executive's employment is
terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than the
obligation to pay to the Executive (x) his 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 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
5. Other Rights. Except as provided hereinafter, nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Except as provided hereinafter, amounts that are vested benefits or that the
Executive is otherwise entitled to receive
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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. In addition, if the Executive 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 benefits provided
under this Agreement or such other agreement, whichever one, in its entirety,
the Executive chooses, but not both agreements, and when the Executive has made
such election, the other agreement shall be superseded in its entirety and shall
be of no further force and effect. The Executive also agrees that to the extent
he 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 that 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 that the Executive may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Executive of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
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
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interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments. Notwithstanding the foregoing provisions of this
Section 7(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Executive, after taking into account the Payments
and the Gross-Up Payment, would not receive a net after-tax benefit of at least
$50,000 (taking into account both income taxes and any Excise Tax) as compared
to the net after-tax proceeds to the Executive resulting from an elimination of
the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an
amount (the "Reduced Amount") such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 7(c), all determinations
required to be made under this Section 7, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Xxxxxx
Xxxxxxxx LLP or, as provided below, such other certified public accounting firm
as may be designated by the Executive (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days after the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by the Company.
In the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the change of control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 7, shall be paid by the Company to the Executive within
five days after the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments 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 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 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
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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 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
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not be entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, that 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 that is or shall
become public knowledge (other than by acts by the Executive or representatives
of the Executive in violation of this Agreement), information that is developed
by the Executive independently of such information, or knowledge or data or
information that is disclosed to the Executive by a third party under no
obligation of confidentiality to the Company. After termination of the
Executive's employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(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 that
assumes and agrees to perform this Agreement by operation of law, or otherwise.
10. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT
OF LAWS. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
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(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: Xxxxxxx X. Xxxxxx
Grant Prideco, Inc.
0000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxx 00000
If to the Company: Grant Prideco, Inc.
0000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxx
with a copy to: Xxxxxxx X. Xxxxxxx
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
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)-(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.
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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.
-----------------------------------------
Xxxxxxx X. Xxxxxx
GRANT PRIDECO, INC.
By
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Name:
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Title:
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