CHANGE OF CONTROL
AGREEMENT
This Change of
Control Agreement (this “Agreement”) is entered into
and deemed effective as of April 16, 2007, by and between
Grant Prideco, Inc., a Delaware corporation (the
“Company”), and Quintin V. Kneen (the
“Employee”).
Whereas , the Employee has
accepted an offer of employment with the Company as Vice President-
Finance; 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, 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:
(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 second 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 two year(s) after such
Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give written 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:
(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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(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 Houston, Texas or other locations
less than 50 miles from downtown Houston, Texas.
(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.
(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
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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 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.
(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:
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(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 Agreemen
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