Exhibit 10.7
EXECUTIVE SEVERANCE
AGREEMENT
(Amended and Restated as of
, 2008)
THIS EXECUTIVE SEVERANCE AGREEMENT,
which is amended and restated and entered into effective as of
(the “Agreement”), is by and between BJ SERVICES
COMPANY, a Delaware corporation (the “Company”), and
(the “Employee”).
WITNESSETH;
WHEREAS, Employee has rendered
outstanding service to the Company, and Employee’s experience
and knowledge of the affairs of the Company and Employee’s
reputation and contacts are extremely valuable to the Company;
and
WHEREAS, in recognition of
Employee’s service to the Company and as an inducement to
Employee to continue in the employ of the Company, the Company has
offered Employee, among other things, this Agreement, and Employee
has accepted the Company’s offer;
NOW, THEREFORE, for and in
consideration of the premises and the mutual covenants and
agreements herein contained, the Company and Employee hereby agree
as follows.
1. Term. This Agreement shall
commence on the date hereof and shall continue until
December 31,
; provided,
however, that commencing on January 1,
and on each
January 1st thereafter, the term of this Agreement shall
automatically be extended for one additional year unless at least
one year prior to such January 1st date the Company shall have
given written notice to Employee that the term of this Agreement
shall cease to be so extended; provided further that, this
Agreement shall automatically terminate in all events upon the
termination of the Employee’s employment for any reason prior
to the commencement of the Protected Period, except as set forth in
Section 2. Notwithstanding anything in this Agreement to the
contrary however, this Agreement may not be terminated and shall
remain in full force and effect for at least two (2) years
following a Change in Control, and such additional time as may be
necessary to give effect to its terms.
2. Termination of Employment
Following a Change in Control. Employee shall be entitled to
the benefits specified in Sections 3(iii) and 4 if (i) a
Change in Control occurs while Employee is employed by the Company,
and this Agreement is in effect, and (ii) during the Protected
Period Employee’s employment is terminated without Cause by
the Company, for Good Reason by Employee, or by Employee without
Good Reason with the consent of the Company’s Board of
Directors (“Board”). If Employee’s employment is
terminated due to Disability or death, or for Cause, then Employee
shall not be entitled to any benefits under this Agreement except
as specified in Sections 3(i) and 3(ii). No benefits hereunder are
payable prior to the date on which a Change in Control occurs
unless otherwise approved by the Board of Directors of the Company.
For purposes of this Agreement, the “Protected Period”
shall mean the period of time beginning with the Change in Control
and ending on the second anniversary of such Change in Control;
provided, however, if Employee’s employment with the Company
terminates prior to, but within six months of, the date on which a
Change in Control occurs, and it is reasonably demonstrated by
Employee that such termination of employment was (i) by
the
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Company in connection with or in anticipation of
the Change in Control or (ii) by Employee under circumstances
which would have constituted Good Reason if the circumstances arose
on or after the Change in Control, then for all purposes of this
Agreement the Change in Control shall be deemed to have occurred,
and the Protected Period shall be deemed to have commenced, on the
date immediately prior to the date of such termination of
Employee’s employment.
(i) Disability. If, as a
result of Employee’s incapacity due to physical or mental
illness, Employee shall have been absent from Employee’s
duties with the Company on a full-time basis for 180 consecutive
calendar days, and within 30 days after written Notice of
Termination (as defined hereinafter) Employee shall not have
returned to the full-time performance of Employee’s duties,
the Company may thereafter notify Employee of termination, which
notice shall, for purposes of this Agreement, constitute
termination of Employee’s employment for
“Disability”; provided, however, a termination of
Employee’s employment for Disability under this Agreement
shall not by itself alter or impair (A) Employee’s
rights as a “disabled employee” or otherwise under any
of the Company’s employee benefit plans or
(B) Employee’s status as an “employee” for
any other purpose, except as otherwise provided in this
Agreement.
(ii) Cause. The Company may
terminate Employee’s employment for Cause. For the purposes
of this Agreement, the Company shall have “Cause” to
terminate Employee’s employment hereunder only (A) upon
the willful and continued failure by Employee to perform
substantially Employee’s duties with the Company, other than
any such failure resulting from Employee’s incapacity due to
physical or mental illness, which failure continues unabated after
a demand for substantial performance is delivered to Employee by
the Board that specifically identified the manner in which the
Board believes that Employee has not substantially performed
Employee’s duties, (B) if Employee willfully engages in
gross misconduct materially and demonstrably injurious to the
Company or (C) upon fraud, misappropriation or embezzlement
related to the business of the Company on the part of Employee. For
purposes of this paragraph, an act or failure to act on
Employee’s part shall be considered “willful” if
done or omitted to be done by Employee otherwise than in good faith
and without reasonable belief that Employee’s action or
omission was in the best interest of the Company. Notwithstanding
the foregoing, Employee shall not be deemed to have been terminated
by the Company for Cause unless and until the Company shall have
delivered to Employee 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 the purpose (after reasonable notice to Employee and an
opportunity for Employee, together with Employee’s counsel,
to be heard before the Board), finding that in the good-faith
opinion of the Board Employee was guilty of conduct constituting
Cause hereunder and specifying the particulars thereof in
reasonable detail.
(iii) Good Reason. Employee
may terminate Employee’s employment for Good Reason. For
purposes of this Agreement “Good Reason” shall mean any
of the following:
(A) Employee is assigned any duties
materially inconsistent with Employee’s positions, duties,
responsibilities and status with the Company immediately prior to a
Change in Control, or Employee’s reporting responsibilities,
titles or offices are materially changed in an adverse manner from
those in effect immediately prior to such Change in Control (as an
illustration, a change from an officer of a publicly traded company
to an officer of a subsidiary of another company would be
considered a material change in the Employee’s
reporting
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responsibility, title and office) or Employee is
removed from or is not re-elected or appointed to any of such
material responsibilities, titles, offices or positions, except in
each case in connection with the termination of Employee’s
employment for Cause, or Disability, or as a result of
Employee’s death, or by Employee for other than Good Reason
and excluding an isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by Employee; provided,
however, that if the Executive Compensation Committee of the Board
of Directors of the Company makes a determination, prior to a
Change in Control, that the Change in Control is a “merger of
equals” for purposes of this Section 2(iii)(A), and
delivers written notice to the Employee that the transaction has
been designated a “merger of equals” for purposes of
this Section 2(iii)(A), and that shorter time periods may
apply under this section, then the following additional provisions
shall apply: In the event that (x) Employee remains employed
as an officer of a publicly-traded company following the Change in
Control but (y) an event or events occur within the first six
months of the Protected Period which constitute Good Reason and
Employee chooses to terminate his or her employment for Good
Reason, then Employee must deliver his or her Notice of Termination
(as defined in paragraph (iv) below) on or before the date
which is six months after the event that constituted Good Reason,
or else lose the right to terminate for Good Reason based on such
event or events and provided, further, that if, during the final
eighteen months of the Protected Period, additional events occur
which also constitute Good Reason, then Employee shall be entitled
to terminate his or her employment for Good Reason at any time
pursuant to the terms of this Agreement; or
(B) Employee’s annual rate of
base salary is reduced from that in effect immediately prior to a
Change in Control or as the same may be increased from time to time
thereafter (such annual rate of base salary, as so increased (if
applicable) but prior to such reduction, is referred to hereinafter
as the “Base Salary”); or
(C) the Company fails to continue
the Company’s annual cash bonus plan for executives as the
same may be modified from time to time, but substantially in the
form in effect prior to the date of the Change in Control (the
“Bonus Plan”), (unless the Bonus Plan is replaced
within a reasonable time with a substantively similar plan (the
“Substitute Plan”)) or fails to continue Employee as a
participant in the Bonus Plan or the Substitute Plan, or reduces
Employee’s “Entry Level,” “Expected
Value,” or “Over-Achievement” guideline
percentages under the Bonus Plan or the Substitute Plan from that
in effect immediately prior to a Change in Control or as increased
thereafter with respect to Employee; or
(D) the Company fails to continue in
effect any material benefit or compensation plan, including, but
not limited to, the Company’s: 1995 Incentive Plan, 1997
Incentive Plan, 2000 Incentive Plan, 2003 Incentive Plan, qualified
retirement plan, executive life insurance plan, perquisite plan,
and/or health and accident plan, in which Employee is participating
immediately prior to a Change in Control, or plans providing
Employee with substantially similar benefits, or the Company takes
any action that would materially adversely affect Employee’s
participation in or reduce Employee’s benefits under any of
such plans (excluding any such action by the Company that is
required by law); or
(E) the Employee is required to
relocate to a location more than 50 miles from where his office was
located on the date of the Change in Control (except for required
travel on company business to an extent substantially consistent
with Employee’s past business travel obligations to the
Company); or
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(F) the Company fails to obtain the
assumption of the obligation to perform this Agreement by any
successor as contemplated in Section 6 hereof; or
(G) any purported termination of
Employee’s employment by the Company that is not effected
pursuant to a Notice of Termination satisfying the requirements of
subparagraph (iv) below and, if applicable, the procedures
described in subparagraph (ii) above; and for purposes of this
Agreement, no such purported termination shall be effective;
or
(H) the amendment, modification or
repeal of any provision of the Articles of Incorporation or Bylaws
of the Company that was in effect immediately prior to such Change
in Control, if such amendment, modification or repeal would
materially adversely affect Employee’s rights to
indemnification by the Company; or
(I) the Company shall violate or
breach any obligation of the Company in effect immediately prior to
such Change in Control, regardless whether such obligation be set
forth in the Bylaws of the Company and/or in a separate agreement
entered into between the Company and Employee, to indemnify
Employee against any claim, loss, expense or liability sustained or
incurred by Employee by reason, in whole or in part, of the fact
that Employee is or was an officer or director of the
Company.
(iv) Notice of Termination.
Any termination by the Company pursuant to subparagraphs
(i) or (ii) above or by Employee pursuant to subparagraph
(iii) above shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this
Agreement, a “Notice of Termination” shall mean a
notice that shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Employee’s employment under the provision so
indicated.
(v) Date of Termination.
“Date of Termination” shall mean the date Employee
terminates employment with the Company. For all purposes of this
Agreement, Employee shall be considered to have terminated
employment with the Company when Employee incurs a
“separation from service” with the Company within the
meaning of Section 409A(a)(2)(A)(i) of the Internal Revenue
Code of 1986, as amended (the “Code”) and applicable
administrative guidance issued thereunder.
3. Compensation During Disability
or Upon Termination.
(i) If during the Protected Period
Employee fails to perform Employee’s normal duties as a
result of incapacity due to physical or mental illness, Employee
shall continue during the period of disability to receive
Employee’s full Base Salary at the rate then in effect and
any awards, deferred and non-deferred, payable during such period
of disability under the Bonus Plan, less any amounts paid to
Employee during such period of disability pursuant to the
Company’s sick-leave or disability program until
Employee’s employment is terminated for Disability pursuant
to Section 2(i) hereof. Notwithstanding the foregoing, any
amount of earned but unpaid Base Salary that is scheduled to be
deferred under a Company-sponsored deferred
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compensation arrangement shall be deferred and
paid in accordance with the provisions of such arrangement. This
Section 3(i) shall not reduce or impair Employee’s
rights to terminate his employment for Good Reason (to the extent
such rights existed prior to such Disability) or with the consent
of the Board as otherwise provided herein.
(ii) If during the Protected Period
Employee’s employment shall be terminated for Cause, the
Company shall pay Employee’s earned but unpaid Base Salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, and the Company shall have no
further obligations to Employee under this Agreement, except those
arising hereunder or under the terms of any Company benefit plans,
prior to the Date of Termination. Notwithstanding the foregoing,
any amount of earned but unpaid Base Salary that is scheduled to be
deferred under a Company-sponsored deferred compensation
arrangement shall be deferred and paid in accordance with the
provisions of such arrangement.
(iii) If during the
Protected Period the Company shall terminate Employee other than
pursuant to Section 2(i) or 2(ii) hereof, or if during the
Protected Period Employee shall terminate Employee’s
employment either for Good Reason or with the consent of the Board,
then, subject to Section 3(iv), Section 4, and
Section 16 (to the extent applicable), the Company shall pay
to Employee, in a single lump sum by certified or bank
cashier’s check on the 60 th day following such Date of
Termination (or the next business day thereafter), the sum of the
amounts specified in subparagraphs (A) through (E) below
and also shall provide Employee the continued employee welfare
benefits as provided in subparagraph (F) and the benefits in
subparagraph (G) below:
(A) an amount equal three times the
sum of (i) Employee’s Base Salary and (ii) the
bonus that Employee would receive using the Expected Value
guideline percentage under the Bonus Plan (the “EV Bonus
Amount”);
(B) an amount equal to the product
of (i) the higher of (a) the EV Bonus Amount or
(b) the bonus that the Employee would receive under the Bonus
Plan based on the performance of the Company for the then current
fiscal year, as of the date of the Change in Control and
(ii) a fraction, the numerator of which is the number of days
in the current fiscal year under the Bonus Plan that have elapsed
on the Date of Termination and the denominator of which is
365;
(C) an amount equal to that portion
of Employee’s Base Salary earned, but not paid, and vacation
earned, but not taken, in each case, to the Date of Termination;
provided, however, that any amount of earned but unpaid Base Salary
that is scheduled to be deferred under a Company-sponsored deferred
compensation arrangement shall be deferred and paid in accordance
with the provisions of such arrangement;
(D) an amount, with respect to all
outstanding unvested and unexercisable awards that have been
granted Employee after a Change in Control under the
Company’s 1990 Stock Incentive Plan, 1995 Incentive Plan,
1997 Incentive Plan, 2000 Incentive Plan, 2003 Incentive Plan, or
any successor or similar stock compensation plan, equal to the sum
of (i) the value of all such unvested (or unearned) shares of
Performance Stock and Performance Units (determined as if all
restrictions had lapsed and all performance goals had been achieved
to the fullest extent)
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and (ii) the excess of the exercise price
of each such unexercisable option and appreciation right over the
closing price of the common shares of the Company stock on the Date
of Termination, as reported on the New York Stock
Exchange;
(E) an amount equal to three times
the value of the largest annual long term incentive grant or grants
made to Employee during the three years prior to the Date of
Termination. For purposes of this section, “long term
incentive grant” shall mean an award of stock options,
performance units, or other long term incentive awards and shall
refer to the initial grant, not the vesting of the award. The value
of such awards shall be the value as of the date they were granted.
The Black-Scholes method of valuation shall be used in the case of
stock options. The value of the other awards shall be their present
value on the date of grant. The Executive Compensation Committee of
the Board of Directors of the Company shall have the authority to
determine the value of all such awards prior to the date of the
Change in Control, and any determination by them shall be final and
binding;
(F) the Company shall at all times
during the three year period following the Date of Termination (the
“Continuation Period”) maintain in full force and
effect for the continued benefit of Employee and Employee’s
eligible dependents all group life and/or executive life (to the
extent permitted under Section 409A of the Code and applicable
administrative guidance issued thereunder), accidental death and
dismemberment, and medical and dental insurance benefits available
to Employee and Employee’s eligible dependents by virtue of
being an employee of the Company immediately prior to such
termination, provided that Employee’s continued participation
is possible under the general terms and provisions of such plans
and programs (or any successor thereto); provided, however, if
Employee retires (as such term is defined in the BJ Services
Company Retirement Thrift Plan), on the Date of Termination or if
Employee would have been eligible to retire within five years of
the Date of Termination, Employee shall be permitted to continue
coverage following the Continuation Period in such group plans and
programs to the extent such group plans and programs provide
benefits for retirees. In the event that participation by Employee
in any such plan or program after the Date of Termination is barred
pursuant to the terms thereof, the Company shall use its best
efforts to obtain at the Company’s expense, and without any
additional cost or liability beyond the cost or liability that
similarly situated employees incur under the terms of such group
plans and programs (and with respect to the benefits for retirees
described in the preceding sentence, the Employee’s cost or
liability may not exceed the cost or liability that similarly
situated employees incur under the terms of such group plans and
programs providing benefits for retirees as in effect on the date
of the Change of Control (or reasonable annual increases thereto)),
to the Employee comparable coverage under individual policies for
Employee (and Employee’s dependents). For purposes of the
preceding sentence, “reasonable annual increases” shall
be limited to annual increases that are no greater than the lesser
of (1) five percent per annum; or (2) any increases to
the cost that similarly situated individuals must pay to obtain
such insurance benefits under group plans and programs made
available to retirees of the Company (including any successor plans
or programs thereto). The medical, dental, and accidental death and
dismemberment coverage described in the preceding sentences of this
Section 3(iii)(F) shall be provided through arrangements that
satisfy the requirements of Sections 105 and 106 of the Code such
that the benefits or reimbursements under such arrangements are not
includible in Employee’s income (and, if continued coverage
under Company’s plans does not satisfy this requirement, then
Company shall arrange, upon comparable terms, for coverage
providing
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substantially equivalent benefits to be provided
under one or more insurance policies that will satisfy this
requirement. At the end of the Continuation Period (except as
otherwise provided in this Section 3(iii)(F) with respect to
COBRA benefits or retiree medical benefits, if either is elected by
Employee), the Company shall arrange to make available to Employee
and his eligible dependents comparable insurance coverage by
enabling Employee to convert Employee’s coverage under the
Company’s group plans or programs to an individual policy for
the benefit of Employee and Employee’s eligible dependents,
or to assume any individual policies obtained by the Company for
Employee’s benefit, with Employee paying the full premiums
after the end of the Continuation Period. Nothing in this
subparagraph (F) shall operate to reduce, or be construed as
reducing, Employee’s (or a beneficiary’s) group health
plan continuation rights under COBRA in any manner and upon the end
of the Continuation Period Employee (or Employee’s
beneficiary(ies)), if otherwise eligible, will be entitled to elect
COBRA continuation coverage for the full period applicable as if
that were Employee’s termination date. In the event Employee
becomes covered by another employer’s group plan or programs
as a result of Employee’s employment during the Continuation
Period, the Company’s plans or programs shall be liable for
benefits only to the extent such benefits are not covered by the
subsequent employer’s plans or programs; and
(G) the Company shall, at its sole
expense as incurred, provide the Employee with reasonable
outplacement services the scope and provider of which shall be
selected by the Employee in his or her sole discretion; provided,
however, that such outplacement services shall in no event be
provided beyond the last day of the second taxable year of Employee
following the taxable year of Employee in which Employee’s
Date of Termination occurred.
(iv) As a condition to the receipt
of any benefit under this Agreement, Employee must first execute
and deliver to the Company a release, substantially in the form
attached hereto as Attachment A, releasing the Company, its
officers, directors, employees and agents from any and all claims
and from any and all causes of action of any kind or character that
Employee may have arising out of Employee’s employment with
the Company or the termination of such employment, but excluding
(A) any claims and causes of action that Employee may have
arising under or based upon this Agreement, (B) rights under
stock-based incentive plans arising in connection with
