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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2008 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ______________ Commission File Number: 001-14273 CORE LABORATORIES N.V. (Exact name of registrant as specified in its charter) The Netherlands Not Applicable (State of other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Herengracht 424 1017 BZ Amsterdam The Netherlands Not Applicable (Address of principal executive offices) (Zip Code) (31-20) 420-3191 (Registrant's telephone number, including area code) None (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ X ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ] The number of common shares of the Registrant, par value EUR
0.04 per share, outstanding at May 8, 2008 was 22,987,532.
CORE LABORATORIES N.V. |
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FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2008 |
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Page |
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PART I - FINANCIAL INFORMATION |
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Item 1. |
Financial Statements |
|
Consolidated Balance Sheets at March 31, 2008 (Unaudited) and December 31, 2007 |
||
Consolidated Statements of Operations (Unaudited) for the Three Months Ended |
||
Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended |
||
Notes to Unaudited Consolidated Interim Financial Statements |
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Management's Discussion and Analysis of Financial Condition and |
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PART II - OTHER INFORMATION |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORE LABORATORIES N.V.
(In thousands, except share and per share data)
March 31, |
December 31, |
|||||
2008 |
2007 |
|||||
ASSETS |
(Unaudited) |
|||||
CURRENT ASSETS: |
||||||
Cash and cash equivalents |
$ 28,527 |
$ 25,617 |
||||
Accounts receivable, net of allowance for doubtful accounts of $4,463 and |
||||||
$4,199 at 2008 and 2007, respectively |
146,736 |
137,231 |
||||
Inventories, net |
31,613 |
29,363 |
||||
Prepaid expenses and other current assets |
37,807 |
28,488 |
||||
TOTAL CURRENT ASSETS |
244,683 |
220,699 |
||||
PROPERTY, PLANT AND EQUIPMENT, net |
92,850 |
93,038 |
||||
INTANGIBLES, net |
6,984 |
7,040 |
||||
GOODWILL |
138,800 |
138,800 |
||||
DEFERRED TAX ASSET |
20,110 |
26,024 |
||||
OTHER ASSETS |
19,481 |
19,189 |
||||
TOTAL ASSETS |
$ 522,908 |
$ 504,790 |
||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||
CURRENT LIABILITIES: |
||||||
Current maturities of long-term debt and capital lease obligations |
$ 1,906 |
$ 3,027 |
||||
Accounts payable |
35,690 |
39,861 |
||||
Accrued payroll and related costs |
27,156 |
25,689 |
||||
Taxes other than payroll and income |
8,720 |
8,820 |
||||
Unearned revenues |
9,537 |
9,130 |
||||
Other accrued expenses |
10,468 |
11,513 |
||||
TOTAL CURRENT LIABILITIES |
93,477 |
98,040 |
||||
LONG-TERM DEBT |
300,000 |
300,000 |
||||
DEFERRED COMPENSATION |
14,080 |
14,080 |
||||
OTHER LONG-TERM LIABILITIES |
39,182 |
29,041 |
||||
COMMITMENTS AND CONTINGENCIES |
||||||
MINORITY INTEREST |
1,588 |
1,486 |
||||
SHAREHOLDERS' EQUITY: |
||||||
Preference shares, EUR 0.04 par value; |
||||||
3,000,000 shares authorized, none issued or outstanding |
- |
- |
||||
Common shares, EUR 0.04 par value; |
||||||
100,000,000 shares authorized, 23,252,659 issued and 22,984,280 outstanding at 2008 |
||||||
and 23,080,949 issued and 23,065,949 outstanding at 2007 |
1,310 |
|
1,300 |
|||
Additional paid-in capital |
11,890 |
- |
||||
Retained earnings |
91,829 |
62,496 |
||||
Accumulated other comprehensive income |
246 |
226 |
||||
Treasury shares (at cost), 268,379 at 2008 and 15,000 at 2007 |
(30,694) |
(1,879) |
||||
TOTAL SHAREHOLDERS' EQUITY |
74,581 |
62,143 |
||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ 522,908 |
$ 504,790 |
The accompanying notes are an integral part of these consolidated financial statements.
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
Three Months Ended March 31, |
||||
|
2008 |
2007 |
||
(Unaudited) |
||||
REVENUES: |
||||
Services |
$ 138,409 |
$ 116,965 |
||
Product Sales |
41,028 |
38,758 |
||
179,437 |
155,723 |
|||
OPERATING EXPENSES: |
||||
Cost of services |
91,159 |
79,854 |
||
Cost of sales |
28,314 |
27,395 |
||
General and administrative expenses |
8,289 |
8,039 |
||
Depreciation |
5,097 |
4,486 |
||
Amortization |
142 |
92 |
||
Other expense (income), net |
2,168 |
(863) |
||
OPERATING INCOME |
44,268 |
36,720 |
||
Interest expense |
644 |
632 |
||
Income before income tax expense |
43,624 |
36,088 |
||
Income tax expense |
14,291 |
10,826 |
||
NET INCOME |
$ 29,333 |
$ 25,262 |
||
EARNINGS PER SHARE INFORMATION: |
||||
Basic earnings per share |
$ 1.28 |
$ 1.08 |
||
Diluted earnings per share |
$ 1.22 |
$ 1.04 |
||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: |
||||
Basic |
22,982 |
23,430 |
||
Diluted |
23,998 |
24,322 |
||
The accompanying notes are an integral part of these consolidated financial statements.
CORE LABORATORIES N.V.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended March 31, |
|||||
|
2008 |
2007 |
|||
(Unaudited) |
|||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|||||
Net income |
$ 29,333 |
$ 25,262 |
|||
Adjustments to reconcile income to net cash provided by operating activities: |
|||||
Net provision for doubtful accounts |
210 |
361 |
|||
Inventory obsolescence |
41 |
51 |
|||
Equity in loss (income) of affiliates |
(55) |
- |
|||
Minority interest |
103 |
(76) |
|||
Stock-based compensation |
827 |
1,148 |
|||
Depreciation and amortization |
5,239 |
4,578 |
|||
Debt issuance costs amortization |
370 |
623 |
|||
Gain on sale of assets |
(1,284) |
(48) |
|||
Realization of pension obligation |
20 |
18 |
|||
Increase in value of life insurance policies |
725 |
(106) |
|||
Deferred income taxes |
2,863 |
177 |
|||
Changes in assets and liabilities, net of effect of dispositions: |
|||||
Accounts receivable |
(9,714) |
(11,144) |
|||
Inventories |
(2,292) |
(2,334) |
|||
Prepaid expenses and other current assets |
(6,363) |
59 |
|||
Other assets |
(1,281) |
(134) |
|||
Accounts payable |
(4,171) |
(3,946) |
|||
Accrued expenses |
729 |
(608) |
|||
Other long-term liabilities |
10,140 |
5,277 |
|||
Net cash provided by operating activities |
25,440 |
19,158 |
|||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||
Capital expenditures |
(5,618) |
(3,427) |
|||
Patents and other intangibles |
(86) |
(45) |
|||
Proceeds from sale of assets |
2,467 |
76 |
|||
Premiums on life insurance |
(430) |
(764) |
|||
Net cash used in investing activities |
(3,667) |
(4,160) |
|||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||
Repayment of debt |
(6,120) |
(982) |
|||
Proceeds from debt borrowings |
5,000 |
- |
|||
Capital lease obligations |
(1) |
(1) |
|||
Stock options exercised |
633 |
16,918 |
|||
Excess tax benefits from stock-based compensation |
10,440 |
2,609 |
|||
Debt issuance costs |
- |
(152) |
|||
Repurchase of common shares |
(28,815) |
(58,624) |
|||
Net cash used in financing activities |
(18,863) |
(40,232) |
|||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
2,910 |
(25,234) |
|||
CASH AND CASH EQUIVALENTS, beginning of period |
25,617 |
54,223 |
|||
CASH AND CASH EQUIVALENTS, end of period |
$ 28,527 |
$ 28,989 |
|||
The accompanying notes are an integral part of these consolidated financial statements. |
CORE LABORATORIES N.V.
NOTES TO THE UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the accounts of Core Laboratories N.V. and its subsidiaries for which we have a controlling voting interest and/or a controlling financial interest. These financial statements have been prepared in accordance with United States ("U.S.") generally accepted accounting principles ("GAAP") for interim financial information using the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements.
Core Laboratories N.V. uses the equity method of accounting for all investments in which it has less than a majority interest and over which it does not exercise control. Minority interest has been recorded to reflect outside ownership attributable to consolidated subsidiaries that are less than 100% owned. In the opinion of management, all adjustments considered necessary for a fair presentation for the periods presented have been included in these financial statements. Furthermore, the operating results presented for the three months ended March 31, 2008 may not necessarily be indicative of the results that may be expected for the year ending December 31, 2008.
Core Laboratories N.V.'s balance sheet information for the year ended December 31, 2007 was derived from the 2007 audited consolidated financial statements but does not include all disclosures in accordance with GAAP.
References to "Core Lab", "we", "our", and similar phrases are used throughout this Quarterly Report on Form 10-Q and relate collectively to Core Laboratories N.V. and its consolidated subsidiaries.
These financial statements should be read in conjunction with the financial statements and the summary of significant accounting policies and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2007.
2. INVENTORIES
Inventories consist of the following (in thousands):
March 31, |
December 31, |
|||
2008 |
2007 |
|||
(Unaudited) |
||||
Finished goods |
$ 22,381 |
$ 21,795 |
||
Parts and materials |
8,241 |
6,433 |
||
Work in progress |
991 |
1,135 |
||
Total inventories, net |
$ 31,613 |
$ 29,363 |
We include freight costs incurred for shipping inventory to customers in the Cost of Sales line of the Consolidated Statement of Operations.
3. GOODWILL AND INTANGIBLES
We account for intangible assets with indefinite lives, including goodwill, in accordance with Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets", which requires us to evaluate these assets for impairment annually, or more frequently if an indication of impairment has occurred. Based upon our most recent evaluation, management determined that goodwill was not impaired. We amortize intangible assets with a defined term on a straight-line basis over their respective useful lives. There were no significant changes related to our intangible assets for the three months ended March 31, 2008. The composition of goodwill by business segment at March 31, 2008 is consistent with the amounts disclosed in our Annual Report on Form 10-K as of December 31, 2007.
4. DEBT AND CAPITAL LEASE OBLIGATIONS
Debt is summarized in the following table (in thousands):
March 31, |
December 31, |
|||
2008 |
2007 |
|||
(Unaudited) |
||||
Senior exchangeable notes |
$ 300,000 |
$ 300,000 |
||
Capital lease obligations |
2 |
3 |
||
Other indebtedness |
1,904 |
3,024 |
||
Total debt and capital leases obligations |
301,906 |
303,027 |
||
Less - short-term debt included in other indebtedness |
1,904 |
3,024 |
||
Less - current maturities of long-term debt and capital lease obligations |
2 |
3 |
||
Long-term debt and capital lease obligations |
$ 300,000 |
$ 300,000 |
In 2006, Core Laboratories LP, a wholly owned subsidiary of Core Laboratories N.V., issued $300 million aggregate principal amount of Senior Exchangeable Notes due 2011 (the "Notes"). The Notes bear interest at a rate of 0.25% per year paid on a bi-annual basis and are fully and unconditionally guaranteed by Core Laboratories N.V. The Notes are exchangeable into shares of Core Laboratories N.V. under certain circumstances at an initial conversion rate of 10.5533 per $1,000 principal amount of notes. Upon exchange, holders will receive cash up to the principal amount, and any excess exchange value will be delivered in Core Laboratories N.V. common shares.
We maintain a revolving credit facility (the "Credit Facility") that allows for an aggregate borrowing capacity of $100.0 million. As amended, this facility provides an option to increase the commitment under the Credit Facility to $150.0 million, if certain conditions are met. The Credit Facility bears interest at variable rates from LIBOR plus 0.5% to a maximum of LIBOR plus 1.125%. %. Any outstanding balance under the Credit Facility is due in December 2010 when the Credit Facility matures. Interest payment terms are variable depending upon the specific type of borrowing under this facility. Our available capacity is reduced by outstanding unsecured letters of credit and performance guarantees and bonds totaling $11.6 million at March 31, 2008 relating to certain projects in progress. Our available borrowing capacity under the Credit Facility at March 31, 2008 was $88.4 million.
5. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
We provide a noncontributory defined benefit pension plan covering substantially all of our Dutch employees, payouts under which are determined based on years of service and final pay or career average pay, depending on when the employee began participating. Employees are immediately vested in the benefits earned. We fund the future obligations of this plan by purchasing investment contracts from a large insurance company. We make annual premium payments, based on each employee's age and current salary, to the insurance company.
The following table summarizes the components of net periodic pension cost under this plan for the three months ended March 31, 2008 and 2007 (in thousands):
Three Months Ended March 31, |
|||
2008 |
2007 |
||
(Unaudited) |
|||
Service cost |
$ 286 |
$ 291 |
|
Interest cost |
338 |
266 |
|
Expected return on plan assets |
(306) |
(243) |
|
Unrecognized pension obligation/(asset), net |
(25) |
(22) |
|
Prior service cost |
45 |
40 |
|
Net periodic pension cost |
$ 338 |
$ 332 |
During the three months ended March 31, 2008, we contributed approximately $1.1 million, as determined by the insurance company, to fund the estimated 2008 premiums on investment contracts held by the plan.
On January 1, 2008, we adopted Statement of Financial Accounting Standards No. 157 ("SFAS 157") Fair Value Measurements for financial assets and liabilities. We have not adopted SFAS 157 for nonfinancial assets and nonfinancial liabilities for those measured on a nonrecurring basis as the adoption date has been deferred until January 1, 2009 pursuant to Financial Accounting Standards Board Staff Position No. 157-2. The application of FAS 157 to the Company's nonfinancial assets and liabilities will primarily be limited to asset impairments including Goodwill and this application is not expected to have a material impact to the Company
. This new standard addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes. On a recurring basis, we use the market approach to value certain liabilities at fair value at quoted prices in an active market (Level 1) and certain assets and liabilities using significant other observable inputs (Level 2). We do not have any assets or liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3). Gains and losses related to the fair value changes in the deferred compensation assets and liabilities are recorded in General and Administrative Expenses in the Consolidated Statement of Operations. The following table summarizes the fair value balances (in thousands):
Fair Value Measurement at March 31, 2008 |
|||||||
Total |
Level 1 |
Level 2 |
Level 3 |
||||
Assets: |
|||||||
Equity and other investment fund assets |
$ 4,562 |
$ - |
$ 4,562 |
$ - |
|||
Liabilities: |
|||||||
Deferred compensation plan |
$ 7,553 |
$ 3,740 |
$ 3,813 |
$ - |
|||
We have adopted a non-qualified deferred compensation plan that allows certain highly compensated employees to defer a portion of their salary, commission and bonus, as well as the amount of any reductions in their deferrals under the deferred compensation plan for employees in the United States (the "Deferred Compensation Plan"), due to certain limitations imposed by the U.S. Internal Revenue Code of 1986, as amended. The Deferred Compensation Plan also provides for employer contributions to be made on behalf of participants equal in amount to certain forfeitures of, and/or reductions in, employer contributions that participants could have received under the 401(k) Plan in the absence of certain limitations imposed by the Internal Revenue Code. Employer contributions to the deferred compensation plan vest ratably over a period of five years. Contributions to the plan are invested in equity and other investment fund assets, and carried on the balance sheet at fair value. The benefits und er these contracts are fully vested and payment of benefits generally commences as soon as practicable after the last day of the calendar quarter during which the participant terminated employment
.
6. COMMITMENTS AND CONTINGENCIES
From time to time, we may be subject to legal proceedings and claims that arise in the ordinary course of business. We believe that the resolution of all litigation currently pending or threatened against Core Lab or any of its subsidiaries should not have a material adverse effect on its consolidated financial condition, results of operations or liquidity; however, because of the inherent uncertainty of litigation, we cannot provide assurance that the resolution of any particular claim or proceeding to which Core Lab or any of its subsidiaries is a party will not have a material adverse effect on its consolidated results of operations or liquidity for the period in which that resolution occurs.
In 2008, we revised our estimate of a contingent liability associated with non-income related taxes, and as a result a charge to income of $5.0 million was recorded in the Consolidated Statement of Operations to Other Expense (Income), net. This adjustment requires judgment, assumptions and estimations to quantify the uncertainties related to this contingent liability. Management has concluded the adjustment relates to prior periods, however as the amounts are not material, no prior periods have been restated. The contingent liability is included in Other Long-term Liabilities in the Consolidated Balance Sheet. Management will continue to assess on a quarterly basis the probable outcome of the settlement of these taxes. The ultimate settlement amount and timing of this contingent liability is uncertain, and could possibly expose the Company to expenses of approximately $20.0 million in excess of our current estimate.
7. SHAREHOLDERS' EQUITY
During the three months ended March 31, 2008, we repurchased 253,379 of our common shares for $28.8 million, at an average price of $113.72 per share which included rights to 44,512 shares valued at $5.0 million, or $112.14 per share, were surrendered to the Company pursuant to the terms of a stock-based compensation plan, in consideration of their personal tax burdens that may result from the issuance of common shares under this plan. Such common shares, unless cancelled, may be reissued for a variety of purposes such as to use for future acquisitions, for settlement of employee stock awards as they vest, or possible conversion of the Notes.
For the three months ended March 31, 2008, we issued 42,160 of our common shares associated with stock option exercises for which we received proceeds of approximately $0.6 million.
During the three month period ended March 31, 2008, we recognized tax benefits of $10.4 million, relating to tax deductions in excess of book expense for stock-based compensation awards. These tax benefits are recorded to additional paid-in capital to the extent deductions reduce current taxable income.
Comprehensive Income
The components of other comprehensive income consisted of the following (in thousands):
March 31, |
||||
2008 |
2007 |
|||
(Unaudited) |
||||
Net income |
$ 29,333 |
$ 25,262 |
||
Realization of pension obligation |
20 |
18 |
||
Total comprehensive income |
$ 29,353 |
$ 25,280 |
Accumulated Other Comprehensive Income consisted of the following (in thousands):
March 31, |
December 31, |
||
2008 |
2007 |
||
(Unaudited) |
|||
Prior service cost |
$ (1,163) |
$ (1,208) |
|
Transition asset |
494 |
519 |
|
Unrecognized net actuarial loss |
915 |
915 |
|
Total accumulated other comprehensive income |
$ 246 |
$ 226 |
8. EARNINGS PER SHARE
We compute basic earnings per common share by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per common and potential common shares include additional shares in the weighted average share calculations associated with the incremental effect of dilutive employee stock options, restricted stock awards and contingently issuable shares, as determined using the treasury stock method. The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share (in thousands):
Three Months Ended March 31, |
||||
2008 |
2007 |
|||
(Unaudited) |
||||
Weighted average basic common shares outstanding |
22,982 |
23,430 |
||
Effect of dilutive securities: |
||||
Stock options |
153 |
664 |
||
Contingent shares |
64 |
121 |
||
Restricted stock and other |
137 |
107 |
||
Senior exchangeable notes |
662 |
- |
||
Weighted average diluted common and potential common shares outstanding |
23,998 |
24,322 |
In 2006, we sold warrants that give the holders the right to acquire approximately 3.2 million of our common shares at an exercise price of $127.56 per share. These warrants could have a dilutive impact on our earnings per share if the share price exceeds the strike price of the warrants.
9. OTHER EXPENSE (INCOME), NET
The components of other expense (income), net, were as follows (in thousands):
Three Months Ended March 31, |
||||
2008 |
2007 |
|||
(Unaudited) |
||||
Minority interest |
$ 103 |
$ (76) |
||
Gain on sale of assets |
(1,284) |
(48) |
||
Foreign exchange (gain) loss |
(746) |
18 |
||
Interest income |
(108) |
(411) |
||
Non-income tax accrual |
5,030 |
- |
||
Other |
(827) |
(346) |
||
Total other expense (income), net |
$ 2,168 |
$ (863) |
In 2008, we revised our estimate of a contingent liability associated with non-income related taxes, and as a result a charge to income of $5.0 million was recorded. Additionally, we recorded a gain of $1.1 million in connection with the sale of a small office building.
Foreign exchange (gains) losses by currency are summarized in the following table (in thousands):
Three Months Ended March 31, |
|||
2008 |
2007 |
||
(Unaudited) |
|||
Canadian Dollar |
$ 215 |
$ 106 |
|
Euro |
(586) |
(38) |
|
Russian Ruble |
(157) |
(40) |
|
Other currencies |
(218) |
(10) |
|
Total (gain) loss |
$ (746) |
$ 18 |
10. SEGMENT REPORTING
Our business units have been aggregated into three complementary segments, which provide products and services for improving reservoir performance and increasing oil and gas recovery from new and existing fields.
* |
Reservoir Description: Encompasses the characterization of petroleum reservoir rock, fluid and gas samples. We provide analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry. |
* |
Production Enhancement: Includes products and services relating to reservoir well completions, perforations, stimulations and production. We provide integrated services to evaluate the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects. |
* |
Reservoir Management: Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs. |
Segment Analysis
We manage each of our business segments separately to reflect the different services and technologies provided and required by each segment. We use the same accounting policies to account for our business segments as those used to prepare our Consolidated Balance Sheets and Consolidated Statements of Operations. We evaluate the performance of our business segments on the basis of operating income.
Summarized financial information relating to our business segments is shown in the following tables (in thousands):
(Unaudited) |
Reservoir Description |
Production Enhancement |
Reservoir Management |
Corporate & Other 1 |
Consolidated |
||||||
Three Months Ended March 31, 2008 |
|||||||||||
Revenues from unaffiliated customers |
$ 100,501 |
$ 67,024 |
$ 11,912 |
$ - |
$ 179,437 |
||||||
Inter-segment revenues |
233 |
193 |
315 |
(741) |
- |
||||||
Segment operating income (loss) |
23,017 |
21,941 |
4,227 |
(4,917) |
44,268 |
||||||
Total assets |
248,200 |
172,796 |
22,385 |
79,527 |
522,908 |
||||||
Capital expenditures |
3,315 |
2,172 |
97 |
34 |
5,618 |
||||||
Depreciation and amortization |
2,929 |
1,386 |
153 |
771 |
5,239 |
||||||
Three Months Ended March 31, 2007 |
|||||||||||
Revenues from unaffiliated customers |
$ 83,163 |
$ 58,807 |
$ 13,753 |
$ - |
$ 155,723 |
||||||
Inter-segment revenues |
167 |
205 |
291 |
(663) |
- |
||||||
Segment operating income |
16,773 |
16,052 |
3,697 |
198 |
36,720 |
||||||
Total assets |
219,681 |
166,627 |
19,358 |
82,544 |
488,210 |
||||||
Capital expenditures |
2,570 |
606 |
89 |
162 |
3,427 |
||||||
Depreciation and amortization |
2,372 |
1,284 |
127 |
795 |
4,578 |
||||||
(1) "Corporate & Other" represents those items that are not directly related to a particular segment and eliminations. |
11. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
Core Laboratories N.V. has fully and unconditionally guaranteed all of the Notes issued by Core Laboratories LP in 2006. Core Laboratories LP is a 100% indirectly owned subsidiary of Core Laboratories N.V.
The following condensed consolidating financial information is included so that separate financial statements of Core Laboratories LP are not required to be filed with the U.S. Securities and Exchange Commission. The condensed consolidating financial statements present investments in both consolidated and unconsolidated affiliates using the equity method of accounting.
The following condensed consolidating financial information presents: condensed consolidating balance sheets as of March 31, 2008 and December 31, 2007, statements of income and the consolidating statements of cash flows for each of the quarters ended March 31, 2008 and 2007 of (a) Core Laboratories N.V., parent/guarantor, (b) Core Laboratories LP, issuer of public debt securities guaranteed by Core Laboratories N.V. and (c) the non-guarantor subsidiaries, (d) consolidating adjustments necessary to consolidate Core Laboratories N.V. and its subsidiaries and (e) Core Laboratories N.V. on a consolidated basis.
Condensed Consolidating Balance Sheets |
|||||||||||
(In thousands) |
March 31, 2008 |
||||||||||
Core Laboratories N.V. (Parent/ Guarantor) |
Core Laboratories LP (Issuer) |
Other Subsidiaries (Non- Guarantors) |
Consolidating Adjustments |
Consolidated Total |
|||||||
ASSETS |
|||||||||||
CURRENT ASSETS: |
|||||||||||
Cash and cash equivalents |
$ 2,137 |
$ 12,195 |
$ 14,195 |
$ - |
$ 28,527 |
||||||
Accounts receivable, net |
187 |
32,761 |
113,788 |
- |
146,736 |
||||||
Inventories, net |
- |
3,377 |
28,236 |
- |
31,613 |
||||||
Prepaid expenses and other current assets |
589 |
12,979 |
24,239 |
- |
37,807 |
||||||
2,913 |
61,312 |
180,458 |
- |
244,683 |
|||||||
PROPERTY, PLANT AND EQUIPMENT, net |
- |
21,362 |
71,488 |
- |
92,850 |
||||||
GOODWILL AND INTANGIBLES, net |
46,986 |
8,573 |
90,225 |
- |
145,784 |
||||||
INTERCOMPANY RECEIVABLES |
58,905 |
277,779 |
351,410 |
(688,094) |
- |
||||||
INVESTMENT IN AFFILIATES |
299,104 |
- |
1,032,902 |
(1,331,717) |
289 |
||||||
DEFERRED TAX ASSET |
2,982 |
20,058 |
- |
(2,930) |
20,110 |
||||||
OTHER ASSETS |
3,276 |
10,685 |
5,231 |
- |
19,192 |
||||||
TOTAL ASSETS |
$ 414,166 |
$ 399,769 |
$ 1,731,714 |
$ (2,022,741) |
$ 522,908 |
||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||||||
CURRENT LIABILITIES: |
|||||||||||
Current maturities of long-term debt and capital lease obligations |
$ 1,904 |
$ - |
$ 2 |
$ - |
$ 1,906 |
||||||
Accounts payable |
1,221 |
4,525 |
29,944 |
- |
35,690 |
||||||
Other accrued expenses |
3,974 |
10,213 |
41,694 |
- |
55,881 |
||||||
7,099 |
14,738 |
71,640 |
- |
93,477 |
|||||||
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS |
- |
300,000 |
- |
- |
300,000 |
||||||
DEFERRED COMPENSATION |
5,879 |
7,744 |
457 |
- |
14,080 |
||||||
DEFERRED TAX LIABILITY |
- |
324 |
2,606 |
(2,930) |
- |
||||||
INTERCOMPANY PAYABLES |
309,590 |
10,189 |
368,315 |
(688,094) |
- |
||||||
OTHER LONG-TERM LIABILITIES |
17,017 |
12,490 |
9,675 |
- |
39,182 |
||||||
MINORITY INTEREST |
- |
- |
1,588 |
- |
1,588 |
||||||
TOTAL SHAREHOLDERS' EQUITY |
74,581 |
54,284 |
1,277,433 |
(1,331,717) |
74,581 |
||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ 414,166 |
$ 399,769 |
$ 1,731,714 |
$ (2,022,741) |
$ 522,908 |
Condensed Consolidating Balance Sheets |
|||||||||||
(In thousands) |
December 31, 2007 |
||||||||||
Core Laboratories N.V. (Parent/ Guarantor) |
Core Laboratories LP (Issuer) |
Other Subsidiaries (Non- Guarantors) |
Consolidating Adjustments |
Consolidated Total |
|||||||
ASSETS |
|||||||||||
CURRENT ASSETS: |
|||||||||||
Cash and cash equivalents |
$ 6,712 |
$ 7,818 |
$ 11,087 |
$ - |
$ 25,617 |
||||||
Accounts receivable, net |
114 |
28,782 |
108,335 |
- |
137,231 |
||||||
Inventories, net |
- |
2,681 |
26,682 |
- |
29,363 |
||||||
Prepaid expenses and other current assets |
887 |
9,901 |
17,700 |
- |
28,488 |
||||||
7,713 |
49,182 |
163,804 |
- |
220,699 |
|||||||
PROPERTY, PLANT AND EQUIPMENT, net |
- |
21,288 |
71,750 |
- |
93,038 |
||||||
GOODWILL AND INTANGIBLES, net |
46,986 |
8,652 |
90,202 |
- |
145,840 |
||||||
INTERCOMPANY RECEIVABLES |
25,828 |
334,793 |
327,791 |
(688,412) |
- |
||||||
INVESTMENT IN AFFILIATES |
267,943 |
- |
914,018 |
(1,181,727) |
234 |
||||||
DEFERRED TAX ASSET |
2,507 |
25,925 |
1,726 |
(4,134) |
26,024 |
||||||
OTHER ASSETS |
3,634 |
11,456 |
3,865 |
- |
18,955 |
||||||
TOTAL ASSETS |
$ 354,611 |
$ 451,296 |
$ 1,573,156 |
$ (1,874,273) |
$ 504,790 |
||||||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|||||||||||
CURRENT LIABILITIES: |
|||||||||||
Current maturities of long-term debt and capital lease obligations |
$ 3,024 |
$ - |
$ 3 |
$ - |
$ 3,027 |
||||||
Accounts payable |
2,417 |
4,581 |
32,863 |
- |
39,861 |
||||||
Other accrued expenses |
1,325 |
21,057 |
32,770 |
- |
55,152 |
||||||
6,766 |
25,638 |
65,636 |
- |
98,040 |
|||||||
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS |
- |
300,000 |
- |
- |
300,000 |
||||||
DEFERRED COMPENSATION |
5,688 |
7,980 |
412 |
- |
14,080 |
||||||
DEFERRED TAX LIABILITY |
4,134 |
- |
- |
(4,134) |
- |
||||||
INTERCOMPANY PAYABLES |
264,976 |
66,550 |
356,886 |
(688,412) |
- |
||||||
OTHER LONG-TERM LIABILITIES |
10,904 |
8,716 |
9,421 |
- |
29,041 |
||||||
MINORITY INTEREST |
- |
- |
1,486 |
- |
1,486 |
||||||
TOTAL SHAREHOLDERS' EQUITY |
62,143 |
42,412 |
1,139,315 |
(1,181,727) |
62,143 |
||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ 354,611 |
$ 451,296 |
$ 1,573,156 |
$ (1,874,273) |
$ 504,790 |
Condensed Consolidating Statements of Operations |
|||||||||||
(In thousands) |
Quarter Ended March 31, 2008 |
||||||||||
Core Laboratories N.V. (Parent/ Guarantor) |
Core Laboratories LP (Issuer) |
Other Subsidiaries (Non- Guarantors) |
Consolidating Adjustments |
Consolidated Total |
|||||||
REVENUES |
|||||||||||
Operating revenues |
$ - |
$ 39,665 |
$ 139,772 |
$ - |
$ 179,437 |
||||||
Intercompany revenues |
267 |
3,852 |
32,669 |
(36,788) |
- |
||||||
Earnings from consolidated affiliates |
38,137 |
- |
95,282 |
(133,419) |
- |
||||||
Total revenues |
38,404 |
43,517 |
267,723 |
(170,207) |
179,437 |
||||||
OPERATING EXPENSES |
|||||||||||
Operating costs |
297 |
21,161 |
98,015 |
- |
119,473 |
||||||
General and administrative expenses |
3,520 |
4,766 |
3 |
- |
8,289 |
||||||
Depreciation and amortization |
- |
1,372 |
3,867 |
- |
5,239 |
||||||
Other expense (income), net |
4,537 |
823 |
21,936 |
(25,128) |
2,168 |
||||||
Operating income |
30,050 |
15,395 |
143,902 |
(145,079) |
44,268 |
||||||
Interest expense |
36 |
608 |
- |
- |
644 |
||||||
Income before income tax expense |
30,014 |
14,787 |
143,902 |
(145,079) |
43,624 |
||||||
Income tax expense (benefit) |
681 |
2,915 |
10,695 |
- |
14,291 |
||||||
NET INCOME |
$ 29,333 |
$ 11,872 |
$ 133,207 |
$ (145,079) |
$ 29,333 |
Condensed Consolidating Statements of Cash Flows |
|||||||||||
(In thousands) |
Quarter Ended March 31, 2008 |
||||||||||
Core Laboratories N.V. (Parent/ Guarantor) |
Core Laboratories LP (Issuer) |
Other Subsidiaries (Non- Guarantors) |
Consolidating Adjustments |
Consolidated Total |
|||||||
Net cash provided by operating activities |
$ 14,287 |
$ 6,238 |
$ 4,915 |
$ - |
$ 25,440 |
||||||
- |
|||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||||||
Capital expenditures |
- |
(3,636) |
(1,982) |
- |
(5,618) |
||||||
Patents and other intangibles |
- |
(22) |
(64) |
- |
(86) |
||||||
Proceeds from sale of assets |
- |
2,227 |
240 |
- |
2,467 |
||||||
Premiums on life insurance |
- |
(430) |
- |
- |
(430) |
||||||
Net cash used in investing activities |
- |
(1,861) |
(1,806) |
- |
(3,667) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||||||||
Repayment of debt |
(1,120) |
(5,000) |
- |
- |
(6,120) |
||||||
Proceeds from debt borrowings |
- |
5,000 |
- |
- |
5,000 |
||||||
Capital lease obligations |
- |
- |
(1) |
- |
(1) |
||||||
Stock options exercised |
633 |
- |
- |
- |
633 |
||||||
Repurchase of common shares |
(28,815) |
- |
- |
- |
(28,815) |
||||||
Excess tax benefit from stock-based payments |
10,440 |
- |
- |
- |
10,440 |
||||||
Net cash used in financing activities |
(18,862) |
- |
(1) |
- |
(18,863) |
||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
(4,575) |
4,377 |
3,108 |
- |
2,910 |
||||||
CASH AND CASH EQUIVALENTS, beginning of period |
6,712 |
7,818 |
11,087 |
- |
25,617 |
||||||
CASH AND CASH EQUIVALENTS, end of period |
$ 2,137 |
$ 12,195 |
$ 14,195 |
$ - |
$ 28,527 |
Condensed Consolidating Statements of Operations |
|||||||||||
(In thousands) |
Quarter Ended March 31, 2007 |
||||||||||
Core Laboratories N.V. (Parent/ Guarantor) |
Core Laboratories LP (Issuer) |
Other Subsidiaries (Non- Guarantors) |
Consolidating Adjustments |
Consolidated Total |
|||||||
REVENUES |
|||||||||||
Operating revenues |
$ - |
$ 29,987 |
$ 125,736 |
$ - |
$ 155,723 |
||||||
Intercompany revenues |
260 |
4,510 |
18,380 |
(23,150) |
- |
||||||
Earnings from consolidated affiliates |
30,276 |
- |
- |
(30,276) |
- |
||||||
Total revenues |
30,536 |
34,497 |
144,116 |
(53,426) |
155,723 |
||||||
OPERATING EXPENSES |
|||||||||||
Operating costs |
314 |
18,771 |
88,164 |
- |
107,249 |
||||||
General and administrative expenses |
1,607 |
6,432 |
- |
- |
8,039 |
||||||
Depreciation and amortization |
- |
1,301 |
3,277 |
- |
4,578 |
||||||
Other expense (income), net |
45 |
1,852 |
20,380 |
(23,140) |
(863) |
||||||
Operating income |
28,570 |
6,141 |
32,295 |
(30,286) |
36,720 |
||||||
Interest expense |
37 |
594 |
11 |
(10) |
632 |
||||||
Income before income tax expense |
28,533 |
5,547 |
32,284 |
(30,276) |
36,088 |
||||||
Income tax expense (benefit) |
3,271 |
3,325 |
4,230 |
- |
10,826 |
||||||
NET INCOME |
$ 25,262 |
$ 2,222 |
$ 28,054 |
$ (30,276) |
$ 25,262 |
Condensed Consolidating Statements of Cash Flows |
|||||||||||
(In thousands) |
Quarter Ended March 31, 2007 |
||||||||||
Core Laboratories N.V. (Parent/ Guarantor) |
Core Laboratories LP (Issuer) |
Other Subsidiaries (Non- Guarantors) |
Consolidating Adjustments |
Consolidated Total |
|||||||
Net cash provided by operating activities |
$ 39,215 |
$ (18,249) |
$ (1,808) |
$ - |
$ 19,158 |
||||||
- |
|||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|||||||||||
Capital expenditures |
- |
(912) |
(2,515) |
- |
(3,427) |
||||||
Patents and other intangibles |
(9) |
(36) |
- |
(45) |
|||||||
Proceeds from sale of assets |
- |
2 |
74 |
- |
76 |
||||||
Premiums on life insurance |
- |
(764) |
- |
- |
(764) |
||||||
Net cash used in investing activities |
- |
(1,683) |
(2,477) |
- |
(4,160) |
||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
|||||||||||
Repayment of debt |
(982) |
- |
- |
- |
(982) |
||||||
Capital lease obligations |
- |
- |
(1) |
- |
(1) |
||||||
Stock options exercised |
16,918 |
- |
- |
- |
16,918 |
||||||
Repurchase of common shares |
(58,624) |
- |
- |
- |
(58,624) |
||||||
Debt issuance costs |
- |
(152) |
- |
- |
(152) |
||||||
Excess tax benefits from stock-based payments |
2,609 |
- |
- |
- |
2,609 |
||||||
Net cash used in financing activities |
(40,079) |
(152) |
(1) |
- |
(40,232) |
||||||
NET CHANGE IN CASH AND CASH EQUIVALENTS |
(864) |
(20,084) |
(4,286) |
- |
(25,234) |
||||||
CASH AND CASH EQUIVALENTS, beginning of period |
1,572 |
35,385 |
17,266 |
- |
54,223 |
||||||
CASH AND CASH EQUIVALENTS, end of period |
$ 708 |
$ 15,301 |
$ 12,980 |
$ - |
$ 28,989 |
12. RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations ("SFAS 141R") which replaces SFAS No.141, Business Combination. SFAS 141R retains the fundamental requirements of SFAS 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. In addition, SFAS 141R's scope is broader in that it applies to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141R is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008 and early adoption is not allowed. We are currently evaluating the effects that SFAS 141R may have on any future business combinations.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51 ("SFAS 160"). SFAS 160 requires companies with noncontrolling interests to disclose such interests clearly as a portion of equity separate from the parent's equity and the amount of consolidated net income attributable to these noncontrolling interests must also be clearly presented on the Consolidated Statement of Operations. In addition, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary will be initially measured at fair value and recorded as a gain or loss. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the effects that SFAS 160 may have on our financial position and results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion summarizes the financial position of Core Laboratories N.V. and its subsidiaries as of March 31, 2008 and should be read in conjunction with (i) the unaudited consolidated interim financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the consolidated financial statements and accompanying notes to our Annual Report on Form 10-K for the fiscal year ended December 31, 2007.
General
Core Laboratories N.V. is a Netherlands limited liability company. It was established in 1936 and is one of the world's leading providers of proprietary and patented reservoir description, production enhancement and reservoir management products and services to the oil and gas industry. These products and services can enable our clients to improve reservoir performance and increase oil and gas recovery from their producing fields. Core Laboratories N.V. has over 70 offices in more than 50 countries and employs approximately 4,900 people worldwide.
References to "Core Lab", "we", "our", and similar phrases are used throughout this Quarterly Report on Form 10-Q and relate collectively to Core Laboratories N.V. and its consolidated affiliates.
Our business units have been aggregated into three complementary segments, which provide products and services for improving reservoir performance and increasing oil and gas recovery from new and existing fields.
* |
Reservoir Description: Encompasses the characterization of petroleum reservoir rock, fluid and gas samples. We provide analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry. |
* |
Production Enhancement: Includes products and services relating to reservoir well completions, perforations, stimulations and production. We provide integrated services to evaluate the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects. |
* |
Reservoir Management: Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs. |
Cautionary Statement Regarding Forward Looking Statements
This quarterly report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Certain of the statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations section, including those under the headings "Outlook" and "Liquidity and Capital Resources", and in other parts of this 10-Q, are forward looking. In addition, from time to time, we may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. Forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "believe", "expect", "anticipate", "estimate", "continue", or other similar words, including statements as to the intent, belief, or current expectations of our directors, officers, and management wi th respect to our future operations, performance, or positions or which contain other forward-looking information. These forward-looking statements are predictions. No assurances can be given that the future results indicated, whether expressed or implied, will be achieved. Our actual results may differ significantly from the results discussed in the forward-looking statements. While we believe that these statements are and will be accurate, a variety of factors could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in our statements. Such factors include, but are not limited to, the risks and uncertainties summarized below:
- |
general and economic business conditions; |
- |
prices of oil and natural gas and industry expectations about future prices; |
- |
foreign exchange controls and currency fluctuations; |
- |
political stability in the countries in which we operate; |
- |
the business opportunities (or lack thereof) that may be presented to and pursued by us; |
- |
changes in laws or regulations; and |
- |
the validity of the assumptions used in the design of our disclosure controls and procedures. |
Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the foregoing risks and uncertainties, see "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as well as the other reports and registration statements filed by us with the SEC.
Outlook
We continue our efforts to expand our market presence by opening facilities in strategic areas and realizing synergies within our business lines. We believe our market presence provides us a unique opportunity to service customers who have global operations in addition to the national oil companies.
We have established internal earnings targets that are based on current market conditions. Based on discussions with our clients and our view of the industry, we anticipate that in 2008 spending by our international clients will increase approximately 20% while we expect North American spending to be relatively flat. Attaining our internal targets is dependent on, among other things, oilfield activity sustained at current levels.
Results of Operations
Unaudited results of operations as a percentage of applicable revenue were as follows (in thousands):
Three Months Ended March 31, |
% Change |
||||||||
2008 |
2007 |
2008/2007 |
|||||||
REVENUES: |
|||||||||
Service |
$138,409 |
77% |
$116,965 |
75% |
18% |
||||
Product sale |
41,028 |
23% |
38,758 |
25% |
6% |
||||
Total revenue |
179,437 |
100% |
155,723 |
100% |
15% |
||||
OPERATING EXPENSES: |
|||||||||
Cost of services* |
91,159 |
66% |
79,854 |
68% |
14% |
||||
Cost of sales* |
28,314 |
69% |
27,395 |
71% |
3% |
||||
Total cost of services and sales |
119,473 |
67% |
107,249 |
69% |
11% |
||||
General and administrative expenses |
8,289 |
5% |
8,039 |
5% |
3% |
||||
Depreciation and amortization |
5,239 |
3% |
4,578 |
3% |
14% |
||||
Other expense (income), net |
2,168 |
1% |
(863) |
(1%) |
(351%) |
||||
Operating income |
44,268 |
25% |
36,720 |
24% |
21% |
||||
Interest expense |
644 |
- |
632 |
- |
2% |
||||
Income before income tax expense |
43,624 |
24% |
36,088 |
23% |
21% |
||||
Income tax expense |
14,291 |
8% |
10,826 |
7% |
32% |
||||
NET INCOME |
$ 29,333 |
16% |
$ 25,262 |
16% |
16% |
||||
*Percentage based on applicable revenue rather than total revenue |
Operating Results for the Three Months Ended March 31, 2008 Compared to the Three Months Ended March 31, 2007 (unaudited)
Service Revenues
Service revenues increased to $138.4 million for the first quarter of 2008, up 18% when compared to $117.0 million for the first quarter of 2007. This increase in revenue was largely attributable to an increase in worldwide oilfield activities, acceptance of recently introduced services by our customers and continued demand for our reservoir optimizing technologies in several North American projects related to oil sands, tight-gas sands, and shale reservoirs. The revenue growth was also driven, in part, by the continued expansion of our worldwide deepwater analysis projects.
Product Sale Revenues
Revenues associated with product sales increased to $41.0 million for the first quarter of 2008, up 6% from $38.8 million for the first quarter of 2007. This increase was primarily the result of continued market acceptance and penetration of new reservoir optimizing technologies introduced in 2007 coupled with the continued increase in drilling activity on a global basis, but more specifically for natural gas in the North American markets which resulted in higher demand for our well completion products.
Cost of Services
Cost of services expressed as a percentage of service revenue improved to 66% for the quarter ended March 31, 2008, down from 68% for the corresponding quarter in 2007. The decline in the cost of services relative to service revenue was primarily as a result of higher incremental margins earned on increased revenues over our relatively fixed cost structure. Incremental margins are calculated as the change in operating income divided by the change in revenues.
Cost of Sales
Cost of sales as a percentage of product sale revenues was 69% for the quarter ended March 31, 2008, which was an improvement from the 71% for the same period in 2007. The decrease in cost of sales as a percentage of product sale revenues for 2008 was primarily due to the growing demand for our new technologies which are our higher margin products, from an overall increase in sales, continued efforts to enhance our manufacturing efficiencies and improved inventory management.
General and Administrative Expenses
General and administrative expenses were relatively flat at $8.3 million for the first quarter of 2008 compared to $8.0 million for the first quarter of 2007.
Depreciation and Amortization Expense
Depreciation and amortization expense of $5.2 million for the first quarter of 2008 increased $0.6 million, from $4.6 million for the first quarter of 2007. This increase in depreciation and amortization expense was primarily due to an increase in capital expenditures as we continue to grow the company.
Other Expense (Income), Net
Other expense (income), net consisted of the following at March 31, 2008 and 2007 (in thousands):
Three Months Ended March 31, |
||||
2008 |
2007 |
|||
(Unaudited) |
||||
Minority interest |
$ 103 |
$ (76) |
||
Gain on sale of assets |
(1,284) |
(48) |
||
Foreign exchange (gain) loss |
(746) |
18 |
||
Interest income |
(108) |
(411) |
||
Non-income tax accrual |
5,030 |
- |
||
Other |
(827) |
(346) |
||
Total other expense (income), net |
$ 2,168 |
$ (863) |
In 2008, we revised our estimate of a contingent liability associated with non-income related taxes, and as a result a charge to income of $5.0 million was recorded. Additionally, we recorded a gain of $1.1 million in connection with the sale of a small office building.
Foreign exchange (gains) losses by currency are summarized in the following table (in thousands):
Three Months Ended March 31, |
||||
2008 |
2007 |
|||
(Unaudited) |
||||
Canadian Dollar |
$ 215 |
$ 106 |
||
Euro |
(586) |
(38) |
||
Russian Ruble |
(157) |
(40) |
||
Other currencies |
(218) |
(10) |
||
Total (gain) loss |
$ (746) |
$ 18 |
Income Tax Expense
The effective tax rates for the first quarter of 2008 and 2007 were 32.8% and 30.0%, respectively.
Segment Analysis
Our operations are managed primarily in three complementary segments - Reservoir Description, Production Enhancement and Reservoir Management. The following table summarizes our results by operating segment for the quarters ended March 31, 2008 and 2007 (in thousands):
Three Months Ended |
|||
2008 |
2007 |
||
Revenues: |
(Unaudited) |
||
Reservoir Description |
$ 100,501 |
$ 83,163 |
|
Production Enhancement |
67,024 |
58,807 |
|
Reservoir Management |
11,912 |
13,753 |
|
Consolidated |
$ 179,437 |
$ 155,723 |
|
Operating income (loss): |
|||
Reservoir Description |
$ 23,017 |
$ 16,773 |
|
Production Enhancement |
21,941 |
16,052 |
|
Reservoir Management |
4,227 |
3,697 |
|
Corporate and Other1 |
(4,917) |
198 |
|
Consolidated |
$ 44,268 |
$ 36,720 |
|
1) "Corporate and Other" represents those items that are not directly related to a particular segment. |
Reservoir Description
Revenues from the Reservoir Description segment increased $17.3 million, to $100.5 million in the first quarter of 2008, compared to $83.2 million in the first quarter of 2007. The revenue increase resulted from unprecedented demand for our reservoir rock and especially for our reservoir fluids characterization services in the Middle East, Asia and Europe and our reservoir optimizing technologies in several North American projects related to the Canadian oil sands, tight gas sands and multiple gas-shale reservoirs. The revenue growth was also driven, in part, by the continued expansion of worldwide deepwater projects.
Operating income in the first quarter of 2008 increased by 37% or $6.2 million to $23.0 million compared to $16.8 million for the first quarter of 2007. Increases in operating income were primarily due to higher incremental margins earned from increased sales over our relatively fixed cost structure. Operating margins for the quarter ended March 31, 2008 were 23% compared to 20% for the same period in 2007.
Production Enhancement
Revenues from the Production Enhancement segment increased $8.2 million to $67.0 million in the first quarter of 2008 as compared to $58.8 million in the first quarter in 2007. The primary reason for the increase in our revenues in this segment has been the further improvement in market penetration and client acceptance of our well perforating and completion products and fracture diagnostic services.
Operating income in the first quarter of 2008 increased by 37% or $5.9 million to $21.9 million from $16.1 million for the first quarter of 2007. Operating margins increased to 33% in the first quarter of 2008 compared to 27% for the same period in 2007. These margin improvements were primarily due to increased market penetration of higher-margin services and products including new enhanced recovery technology, such as our SpectraScan™ and SpectraChem™ tracer service and our new SuperHERO™ perforating charges and gun systems.
Reservoir Management
Revenues from the Reservoir Management segment decreased $1.8 million in the first quarter of 2008 as compared to the first quarter of 2007. The decrease in revenue was a result of the culmination of several large projects in the first quarter of 2007.
Operating income in the first quarter of 2008 increased 14% to $4.2 million from $3.7 million for the first quarter of 2007. The increase was primarily due to the continued expansion of the multi-client reservoir study sales in the U.S. and new studies being performed including a gas-shale study focused in the Appalachian region and a study on tight gas sands in the Middle East region.
Liquidity and Capital Resources
General
We have historically financed our activities through cash on hand, cash flows from operations, bank credit facilities, or the issuance of debt and equity financing.
We utilize the non-GAAP financial measure of free cash flow to evaluate our cash flows and results of operations. Free cash flow is defined as net cash provided by operating activities (which is the most directly comparable GAAP measure) less capital expenditures. Management believes that free cash flow provides useful information to investors as it represents the cash, in excess of capital expenditures, available to operate the business and fund non-discretionary obligations. Free cash flow is not a measure of operating performance under GAAP, and should not be considered in isolation nor construed as an alternative to operating profit, net income (loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP. Moreover, since free cash flow is not a measure determined in accordance with GAAP and thus is susceptible to varying interpretations and calculations, free cash flow as presented, may not be comparable to similarly titled measures presented by other companies. The following table reconciles this non-GAAP financial measure to the most directly comparable measure calculated and presented in accordance with U.S. GAAP for the three month period ended March 31, 2008 and 2007 (in thousands):
Three Months Ended March 31, |
||||
2008 |
2007 |
|||
Free cash flow calculation: |
(unaudited) |
|||
Net cash provided by operating activities |
$ 25,440 |
$ 19,158 |
||
Less: capital expenditures |
5,618 |
3,427 |
||
Free cash flow |
$ 19,822 |
$ 15,731 |
The increase in free cash flow in 2008 compared to 2007 was due to a higher net income partially offset by an increase in capital expenditures. Additionally, working capital, excluding cash, increased at a reduced rate in the first quarter of 2008 as compared to first quarter of 2007, and therefore had less of an impact on cash flow in the current year. At March 31, 2008 and December 31, 2007, we had working capital of $151.2 million and $122.7 million, respectively.
Cash Flows
The following table summarizes cash flows for the three months ended March 31, 2008 and 2007 (in thousands):
Three Months Ended March 31, |
||||
2008 |
2007 |
|||
Cash provided by/(used in): |
(unaudited) |
|||
Operating activities |
$ 25,440 |
$ 19,158 |
||
Investing activities |
(3,667) |
(4,160) |
||
Financing activities |
(18,863) |
(40,232) |
||
Net change in cash and cash equivalents |
$ 2,910 |
$ (25,234) |
The increase in cash flows provided by operating activities was primarily attributable to an increase in net income along with a decrease in prepaid expenses and an increase in accrued liabilities and other long-term liabilities due to timing of payments.
The decrease in cash flows used in financing activities related primarily to the number of shares repurchased under our common share repurchase program. In the first three months of 2008, we repurchased 253,379 shares for an aggregate price of $28.8 million compared to 743,650 shares for an aggregate price of $58.6 million during the three months ended March 31, 2007. The decrease in cash flows used in financing activities was also attributable to a decrease in stock options exercised in 2008 as compared to 2007 of $16.3 million.
We maintain a revolving credit facility (the "Credit Facility") that allows for an aggregate borrowing capacity of $100.0 million. As amended, this facility provides an option to increase the commitment under the Credit Facility to $150.0 million, if certain conditions are met. The Credit Facility bears interest at variable rates from LIBOR plus 0.5% to a maximum of LIBOR plus 1.125%. Any outstanding balance under the Credit Facility is due in December 2010 when the Credit Facility matures. Interest payment terms are variable depending upon the specific type of borrowing under this facility. Our available capacity is reduced by outstanding unsecured letters of credit and performance guarantees and bonds totaling $11.6 million at March 31, 2008 relating to certain projects in progress. Our available borrowing capacity under the Credit Facility at March 31, 2008 was $88.4 million.
The terms of the Credit Facility require us to meet certain financial and operational covenants. We believe that we are in compliance with all such covenants at March 31, 2008. All of our material, wholly owned subsidiaries are guarantors or co-borrowers under the Credit Facility.
Our ability to maintain and grow our operating income and cash flow depends, to a large extent, on continued investing activities. We are a Netherlands holding company and substantially all of our operations are conducted through subsidiaries. Consequently, our cash flow depends upon the ability of our subsidiaries to pay cash dividends or otherwise distribute or advance funds to us. We believe our future cash flows from operations, supplemented by our borrowing capacity and issuances of additional equity should be sufficient to fund our debt requirements, capital expenditures, working capital, and future acquisitions.
Recent Accounting Pronouncements
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations ("SFAS 141R") which replaces SFAS No.141, Business Combination. SFAS 141R retains the fundamental requirements of SFAS 141 that the acquisition method of accounting be used for all business combinations and for an acquirer to be identified for each business combination. In addition, SFAS 141R's scope is broader in that it applies to all transactions and other events in which one entity obtains control over one or more other businesses. SFAS 141R is effective on a prospective basis for all business combinations for which the acquisition date is on or after the beginning of the first annual period subsequent to December 15, 2008 and early adoption is not allowed. We are currently evaluating the effects that SFAS 141R may have on any future business combinations.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No. 51 ("SFAS 160"). SFAS 160 requires companies with noncontrolling interests to disclose such interests clearly as a portion of equity separate from the parent's equity and the amount of consolidated net income attributable to these noncontrolling interests must also be clearly presented on the Consolidated Statement of Operations. In addition, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary will be initially measured at fair value and recorded as a gain or loss. SFAS 160 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the effects that SFAS 160 may have on our financial position and results of operations.
Item 3. Quantitative and Qualitative Disclosures of Market Risk
There have been no material changes in market risk from the information provided in Item 7A. "Quantitative and Qualitative Disclosures About Market Risk" in our Annual Report on Form 10-K as of December 31, 2007.
Item 4. Controls and Procedures
A complete discussion of our controls and procedures is included in our Annual Report on Form 10-K for the year ended December 31, 2007.
Disclosure Controls and Procedures
Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Core Laboratories N.V.'s disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed by us in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. Based on such evaluation, our Chief Executive Officer and Chief Financial O fficer have concluded that our disclosure controls and procedures were effective as of March 31, 2008 at the reasonable assurance level. Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. Further, the design of disclosure controls and internal control over financial reporting must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our fiscal quarter ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
CORE LABORATORIES N.V.
Item 1. Legal Proceedings
See Note 6 of Consolidated Interim Financial Statements in Part I, Item 1.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about purchases of equity securities that are registered by us pursuant to Section 12 of the Exchange Act during the quarter ended March 31, 2008:
Period |
Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of a Publicly Announced Program |
Maximum Number of Shares That May Yet be Purchased Under the Program |
||||
January 1-31, 2008 |
129,567 |
$ 113.86 |
129,567 |
1,189,812 |
||||
February 1-29, 2008 (1) |
120,036 |
$ 113.33 |
79,300 |
1,110,512 |
||||
March 1-31, 2008 (2) |
3,776 |
$ 121.60 |
- |
1,110,512 |
||||
Total |
253,379 |
$ 113.72 |
208,867 |
|||||
(1) Contains 40,736 shares valued at $4.5 million, or $111.26 per share, surrendered to us by participants in a stock-based compensation plan to settle any personal tax liabilities which may result from the award in February 2008.
(2) Contains 3,776 shares valued at $0.5 million, or $121.60 per share, surrendered to us by participants in a stock-based compensation plan to settle any personal tax liabilities which may result from the award in March 2008.
Under Dutch law and our articles of association, and subject to certain Dutch statutory provisions, we may repurchase up to 10% of our issued share capital in open market purchases. In connection with our initial public offering in September 1995, our shareholders authorized our Management Board to make such repurchases for a period of 18 months. At each annual shareholders' meeting subsequent to 1995, our shareholders have renewed that authorization.
Exhibit No. |
Exhibit Title |
Incorporated by reference from the following documents |
||
3.1 |
- |
Articles of Association of Core Laboratories N.V., as amended (including English translation) |
Form F-1, September 20, 1995 (File No. 000-26710) |
|
3.2 |
- |
Amendments to the Articles of Association of Core Laboratories N.V. |
Proxy Statement dated May 17, 2006 for Annual Meeting of Shareholders |
|
10.1* |
- |
Form of Restated Employment Agreement between Core Laboratories N.V. and David Michael Demshur dated as of December 31, 2007 |
|
|
10.2* |
- |
Form of Restated Employment Agreement between Core Laboratories N.V. and Richard Lucas Bergmark dated as of December 31, 2007 |
|
|
10.3* |
- |
Form of Restated Employment Agreement between Core Laboratories N.V. and Monty Lee Davis dated as of December 31, 2007 |
|
|
10.4* |
- |
Form of Restated Employment Agreement between Core Laboratories N.V. and John David Denson dated as of December 31, 2007 |
|
|
10.5* |
- |
Amendment to Core Laboratories Supplement Executive Retirement Plan dated as of March 5, 2008 |
|
|
10.6* |
- |
Amendment to Core Laboratories Supplemental Executive Retirement Plan for Monty L. Davis dated as of March 5, 2008 |
|
|
10.7* |
- |
Amendment to Core Laboratories Supplemental Executive Retirement Plan for John D. Denson dated as of March 5, 2008 |
|
|
31.1 |
- |
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
31.2 |
- |
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
32.1 |
- |
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
32.2 |
- |
Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
* |
Management contract or compensatory plan or arrangement |
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant, Core Laboratories N.V., has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CORE LABORATORIES N.V. |
|||
By: |
Core Laboratories International B.V., its |
||
Managing Director |
|||
Date: |
May 8, 2008 |
By: |
/s/ Richard L. Bergmark |
Richard L. Bergmark |
|||
Chief Financial Officer |
|||
Duly Authorized Officer and |
|||
Principal Financial Officer |
Employment Agreement
(Restated as of December 31, 2007)
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made by and between CORE LABORATORIES N.V. and David M. Demshur ("Executive").
W
I T N E S S E T H:WHEREAS, Executive is currently an employee of Core Laboratories N.V. and/or one or more of its Affiliates ("Company"); and
WHEREAS, the Company desires to continue to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth, and Executive is desirous of continuing to be employed by Company on such terms and conditions, and for such consideration;
NOW, THEREFORE, for and in consideration of the amounts and benefits to be paid and provided to Executive under this Agreement and the mutual promises, covenants, and undertakings contained herein, Core Laboratories N.V. and Executive, each intending to be legally bound, hereby agree as follows:
I.
Employment and Duties
1.1 Employment; Effective Date. Company agrees to employ Executive, and Executive agrees to be employed by Company, beginning as of the Effective Date and continuing for the period of time set forth in Article III of this Agreement, subject to the terms and conditions of this Agreement.
1.2 Position. From and after the Effective Date, Company shall employ Executive in the position of Chief Executive Officer of Company, or in such other comparable executive position as Company and Executive may mutually agree.
1.3 Duties and Services. Executive agrees to serve in the position referred to in Section 1.2 and to perform diligently and to the best of Executive's abilities the duties and services appertaining to such office, as well as such additional duties and services appropriate to such office upon which the parties mutually may agree from time to time. Executive's employment shall also be subject to the policies maintained and established by Company, as the same may be amended from time to time.
1.4 Other Interests. Executive agrees, during the period of Executive's employment by Company, to devote Executive's primary business time, energy, and best efforts to the business and affairs of Company and its Affiliates and not to engage, directly or indirectly, in any other business or businesses, whether or not similar to that of Company, except with the consent of the Board of Directors. The foregoing notwithstanding, the parties recognize and agree that Executive may, without consent of the Board of Directors, engage in charitable, civic, and other business activities that do not conflict with the business and affairs of Company and in passive personal investments, so long as such activities do not interfere with Executive's performance of Executive's duties hereunder.
1.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the best interests of Company. In keeping with these duties, Executive shall make full disclosure to Company of all business opportunities pertaining to Company's business and shall not appropriate for Executive's own benefit business opportunities concerning the subject matter of the fiduciary relationship.
II.
Compensation and Benefits
2.1 #9; Base Salary. During the period of this Agreement, Executive shall receive a minimum annual base salary of $625,000. Executive's annual base salary shall be reviewed by the Board of Directors (or a committee thereof) on an annual basis, and, in the sole discretion of the Board of Directors (or such committee), such annual base salary may be increased, but not decreased no less than once every calendar year. Executive's annual base salary shall be paid in equal installments in accordance with the Company's standard policy regarding payment of compensation to executives but no less frequently than monthly.
2.2 Bonuses. Executive shall be eligible to receive an annual bonus of up to 150% of Executive's annual base salary with the amount of such bonus to be determined by the Committee based upon criteria established from time to time by the Committee.
2.3 Employee Benefits. Executive and, to the extent applicable, Executive's spouse, dependents, and beneficiaries shall be allowed to participate in all benefits, plans, and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to other executive employees of Company (or such Affiliate at whose offices Executive spends a majority of his working time, as the case may be). Such benefits, plans, and programs shall include, without limitation, any deferred compensation plan, matching share program, performance share program, profit sharing plan, thrift plan, health insurance or health care plan, life insurance (including any available supplemental insurance), disability insurance (including any available supplemental insurance), pension plan, supplemental retirement plan, stock option plan, vacation and sick leave plan, and the like which may be maintained by Company (or such Affiliate, as the case may be) for Execut ive specifically or for employees of Executive's seniority and position generally. Company shall not, however, by reason of this Section be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such benefit, plan, or program, so long as such changes are similarly applicable to executive employees specifically, and no worse than all other employees generally; provided, however, that in the case of any discontinuation of any such benefit, plan or program, Company shall continue to provide such benefit or coverage through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual benefits or coverage at its expense.
2.4 Business and Entertainment Expenses. During his employment hereunder, subject to Company's standard policies and procedures with respect to expense reimbursement as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business-related purposes, including, but not limited to, dues and fees to industry and professional organizations and costs of entertainment and business development.
2.5 Indemnification. Company agrees to indemnify Executive against any and all liabilities arising out of Executive's employment duties to the extent such liabilities are not covered by any insurance maintained by Company or Executive, including any liabilities that are caused by or result from an act or omission constituting the negligence of Executive in the performance of such duties, but excluding liabilities that are caused by or result from Executive's own gross negligence or willful misconduct.
III.
Term and Termination of Employment
3.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date. Said term of employment shall be extended automatically for an additional successive three-year period as of each annual anniversary date of the Effective Date that occurs while this Agreement is in effect; provided, however, that if, at any time prior to any such anniversary date of the Effective Date, either party shall give written notice to the other that no such automatic extension shall occur, then Executive's employment shall terminate on the last day of the three-year period beginning on the annual anniversary date of the Effective Date that next occurs after such notice is given.
3.2 Company's Right to Terminate. Notwithstanding the provisions of Section 3.1, Company shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons:
(i) Upon Executive's death;
(ii) Upon Executive's becoming incapacitated by accident, sickness, or other circumstance that renders Executive mentally or physically incapable of performing the duties and services required of Executive hereunder on a full-time basis for a period of at least 180 consecutive calendar days;
(iii) For Cause;
(iv) For Executive's material breach of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice to Executive by Company of such breach; or
(v) For any other reason whatsoever, in the sole discretion of the Board of Directors.
3.3 Executive's Right to Terminate. Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons:
(i) A material breach by Company of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice of such breach by Executive to Company;
(ii) For Good Reason; or
(iii) For any other reason whatsoever, in the sole discretion of Executive.
3.4 Notice of Termination. If Company or Executive desires to terminate Executive's employment hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, Company or Executive shall do so by giving written notice of such termination to the other party and stating the effective date and reason for such termination; provided, however, that no such action shall alter or amend any other provisions hereof or rights arising hereunder, including, without limitation, the provisions of Articles V and VI hereof. For all purposes of this Agreement, Executive shall be considered to have terminated employment with Company when Executive incurs a "separation from service" with Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.
IV.
Effect of Termination of Employment
4.1 Termination By Expiration of Term. If Executive's employment hereunder shall terminate upon expiration of the term provided in Section 3.1 hereof, all compensation and all benefits to Executive hereunder shall terminate contemporaneously with termination of Executive's employment, except for such benefits as may be required by law.
4.2 Termination By Company. If Executive's employment hereunder shall be terminated by Company prior to expiration of the term provided in Section 3.1, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment; provided, however, that if such termination shall be for any reason other than those encompassed by Section 3.2(i), 3.2(ii), 3.2(iii), or 3.2(iv), Company shall (i) pay Executive a Termination Payment and (ii) provide Executive with Severance Benefits; provided further, however, that if termination is pursuant to Section 3.2(i) or 3.2(ii), the Company will provide Employee's spouse and dependent children with the benefits covered under Section 8.1(15)(iv); and provided further that all outstanding stock options granted by Company to Executive shall immediately become fully vested and immediately exercisable in full as provided under Section 8.1(15)(ii). The Termination Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the prime rate of interest published in The Wall Street Journal on the date of termination of Executive's employment (or if not published on that date, on the next following date when published) (the "Section 409A Interest Rate")) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the earlier of the date of Executive's death or the date that is six (6) months after the date of termination of Executive's employment (the "Section 409A Paymen t Date"). Executive hereby agrees to be bound by Company's determination of its "specified employees" (as such term is defined in Section 409A of the Code) in accordance with any of the methods permitted under the regulations issued under Section 409A of the Code.
4.3 Termination By Executive. If Executive's employment hereunder shall be terminated by Executive prior to expiration of the term provided in Section 3.1, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment; provided, however, that Company shall (i) pay Executive a Termination Payment and (ii) provide Executive with Severance Benefits. The Termination Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the Section 409A Interest Rate) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the Section 409A Payment Date.
4.4 Change in Control. If, within three (3) years following the occurrence of a Change in Control, Executive's employment with Company shall terminate for any reason, then, in lieu of any Termination Payment or Severance Benefits pursuant to Section 4.2 or 4.3, Company shall (1) pay Executive a Change in Control Payment and (2) provide Executive with Change in Control Benefits. The Change in Control Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the Section 409A Interest Rate) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the Section 409A Payment Date.
4.5 Parachute Payment Gross Up. Notwithstanding anything to the contrary in this Agreement, in the event that any payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive an additional payment (a "Gross-up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed on any Gross-up Payment, Executive retains an amount of the Gross-up Payment equal to the Excise Tax imposed upon the Payments. The Gross-up P ayment attributable to a particular Payment shall be made at the time such Payment is made; provided, however, that in no event shall the Gross-up Payment be made later than the end of Executive's taxable year next following Executive's taxable year in which Executive remits the related taxes. Executive shall notify Company in writing of any claim by the Internal Revenue Service which, if successful, would require Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially determined by Company) within ten days of the receipt of such claim. Company shall notify Executive in writing at least ten days prior to the due date of any response required with respect to such claim if it plans to contest the claim. If Company decides to contest such claim, Executive shall cooperate fully with Company in such action; provided, however, Company shall bear and pay directly or indirectly all costs and expenses (including additional interest and penalties) incurred in connection with s uch action and shall indemnify and hold 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 Company's action. If, as a result of Company's action with respect to a claim, Executive receives a refund of any amount paid by Company with respect to such claim, Executive shall promptly pay such refund to Company. If Company fails to timely notify Executive whether it will contest such claim, or if Company determines not to contest such claim, Company shall immediately pay to Executive the portion of such claim, if any, which it has not previously paid to Executive. All determinations required to be made under this Section 4.5, including, without limitation, 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 the independent public accounting firm used by Company immediately prior to the C hange in Control for purposes of preparing Company's audited financial statements. However, in the event such accounting firm is also serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder.
4.6 #9; No Duty to Mitigate Losses. Executive shall have no duty to find new employment following the termination of Executive's employment under circumstances that require Company to pay any amount to Executive pursuant to this Article IV. Any salary or remuneration received by Executive from a third party for the providing of personal services (whether by employment or by functioning as an independent contractor) following the termination of Executive's employment under circumstances pursuant to which this Article IV apply shall not reduce Company's obligation to make a payment to Executive (or the amount of any such payment) pursuant to the terms of this Article IV.
4.7 Liquidated Damages. In light of the difficulties in estimating the damages for an early termination of this Agreement, Company and Executive hereby agree that the payments, if any, to be received by Executive pursuant to this Article IV shall be received by Executive as liquidated damages and not as a penalty.
4.8 Other Compensation Programs. This Agreement governs the rights and obligations of Executive and Company with respect to Executive's annual base salary and certain perquisites of employment. Executive's rights and obligations both during the term of Executive's employment and thereafter with respect to stock options, restricted stock, incentive and deferred compensation, life insurance policies insuring the life of Executive, and other benefits under plans and programs maintained by Company shall be governed by the separate agreements, plans, programs, and other documents and instruments governing such matters, or as may be provided by law.
V.
Protection of Information
5.1 Disclosure to Executive. Company shall (i) disclose to Executive, or place Executive in a position to have access to or develop, trade secrets or confidential information of Company or its Affiliates, and/or (ii) entrust Executive with business opportunities of Company or its Affiliates, and/or (iii) place Executive in a position to develop business good will on behalf of Company or its Affiliates.
5.2 Disclosure to and Property of Company. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed, or acquired by Executive, individually or in conjunction with others, during Executive's employment by Company (whether during business hours or otherwise and whether on Company's premises or otherwise) that relate to Company's business, products, or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisitions prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Company and are and shall be the sole and exclusive property of Compan y. Moreover, all documents, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Company. Upon termination of Executive's employment by Company, for any reason, Executive promptly shall deliver the same, and all copies thereof, to Company.
5.3 No Unauthorized or Damaging Use or Disclosure. Executive will not, at any time during or after Executive's employment by Company, make any unauthorized disclosure of any confidential business information or trade secrets of Company or its Affiliates, or make any use thereof, except in the carrying out of Executive's employment responsibilities hereunder. Affiliates of the Company shall be third party beneficiaries of Executive's obligations under this Section. As a result of Executive's employment by Company, Executive may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Company and its Affiliates. Executive also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Company's confidential business information a nd trade secrets. Executive shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives (i) that are slanderous, libelous, or defamatory, or (ii) that disclose private or confidential information about Company, any of its Affiliates, or any of such entities' business affairs, officers, employees, agents, or representatives, or (iii) that constitute an intrusion into the seclusion or private lives of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives, or (iv) that give rise to unreasonable publicity about the private lives of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives, or (v) that place Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives in a false light before the public, or (vi) that constitute a misappropriation of the name or likeness of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined by the courts.
5.4 Ownership by Company. If, during Executive's employment by Company, Executive creates any work of authorship fixed in any tangible medium of expression, which is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Company's business, products, or services, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on Company's premises or otherwise), Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executive's employment; or, if the work is not prepared by Executive within the scope of Executive's employment but is specially ordered by Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translat ion, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Company shall be the author of the work. If such work is neither prepared by Executive within the scope of Executive's employment nor a work specially ordered that is deemed to be a work made for hire, then Executive hereby agrees to assign, and by these presents does assign, to Company all of Executive's worldwide right, title, and interest in and to such work and all rights of copyright therein.
5.5 Assistance by Executive. Both during the period of Executive's employment by Company and thereafter, Executive shall assist Company and its nominee, at any time, in the protection of Company's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries.
5.6 Remedies. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by Executive, and Company shall be entitled to enforce the provisions of this Article by terminating any and all payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to Company, including the recovery of damages from Executive and his agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.
VI.
Noncompetition Obligation
6.1 In General. As part of the consideration for the compensation and benefits to be paid to Executive hereunder; to protect the trade secrets and confidential information of Company and its Affiliates that have been and will in the future be disclosed or entrusted to Executive, the business good will of Company and its Affiliates that has been and will in the future be developed in Executive, or the business opportunities that have been and will in the future be disclosed or entrusted to Executive by Company and its Affiliates; and, as an additional incentive for Company to enter into this Agreement, Company and Executive agree to the noncompetition obligations hereunder. Executive shall not, directly or indirectly for Executive or for others, in any geographic area or market where Company or any of its Affiliates are conducting any business as of the date of the termination of the employment relationship or have during the previous twelve months conducted such busi ness:
(i) Engage in any business competitive with the business conducted by Company;
(ii) Provide comparable services to any other person, association, or entity who is primarily engaged in any business competitive with the business conducted by Company with respect to such competitive business; or
(iii) Induce any employee of Company or any of its Affiliates to terminate his or her employment with Company or such Affiliates, or hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Company.
The restrictions placed on Executive by this Section 6.1 shall apply during the period that Executive is employed by Company and for the two-year period thereafter if Executive's employment with Company is terminated for any reason other than (a) by Executive for a Good Reason or (b) by Company without Cause. Notwithstanding the foregoing, from and after the date upon which a Change in Control occurs, such restrictions shall cease to apply to Executive except for any period during which he is employed by Company.
6.2 Enforcement and Remedies. Executive understands that the restrictions set forth in Section 6.1 may limit Executive's ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Executive will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by Executive, and Company shall be entitled to enforce the provisions of this Article by terminating any payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to Company, including without limitation, the recovery of damages from Executive and E xecutive's agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.
6.3 Reformation. It is expressly understood and agreed that Company and Executive consider the restrictions contained in this Article to be reasonable and necessary to protect the proprietary information of Company. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such court so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.
VII.
Miscellaneous
7.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Company to: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Attention: Managing Director
cc: General Counsel
Core Laboratories, Inc.
6316 Windfern
Houston, Texas 77040
If to Executive to: David M. Demshur
c/o 6316 Windfern
Houston, Texas 77040
or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.
7.2 Applicable Law. This Agreement is entered into under, and shall be governed for all purposes by, the laws of the state of Texas, except as may be preempted by federal law.
7.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
7.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.
7.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
7.6 Withholding of Taxes and Other Employee Deductions. Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city, and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company's employees generally.
7.7 Headings. The Article and Section headings herein have been inserted for purposes of convenience only and shall not be used for interpretive purposes.
7.8 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.
7.9 Assignment. This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or otherwise. Except as provided in the preceding sentence, this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit, or obligation of either party hereto shall be subject to voluntary or involuntary assignment, alienation, or transfer, whether by operation of law or otherwise, without the prior written consent of the other party.
7.10 Term. This Agreement has a term co-extensive with the term of employment provided in Section 3.1. Termination shall not affect any right or obligation of any party which is accrued or vested prior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles V and VI shall survive any termination of the employment relationship and/or of this Agreement.
7.11 Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties, and agreements between the parties with respect to employment of Executive by Company. Without limiting the scope of the preceding sentence, all prior understandings and agreements among the parties hereto relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement) are hereby null and void and of no further force and effect. Any modification of this Agreement will be effective only if it is in writing and signed by the party to be charged.
7.12 Legal Fees and Expenses. It is the intent of Company that Executive not be required to bear any legal fees or related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement (by litigation or otherwise) with respect to any termination of his employment on or after a Change in Control. Accordingly, if it should appear to Executive that Company has failed to comply with any of its obligations under this Agreement or in the event that Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Executive any benefit provided or intended to be provided to Executive hereunder, in each case with respect to his rights or obligations upon or following a termination of his employment on or after a Change in Control, then Company irrevocably authorizes the Executive fro m time to time to retain counsel of Executive's choice, at the expense of Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, including, without limitation, the initiation or defense of any litigation or other legal action, whether by or against Company or any director, officer, stockholder or other person affiliated with Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between Company and such counsel, Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection Company and Executive agree that a confidential relationship will exist between Executive and such counsel. Without regard to whether Executive prevails, in whole or in part, in connection with any of the foregoing, Company will pay and be solely financially responsible for any and all attorneys' fees and related expenses incurred by Executive in connection with any of the fo regoing, except to the extent that a final judgment no longer subject to appeal finds that a claim or defense asserted by Executive was frivolous. In such a case, the portion of such fees and expenses incurred by Executive attributable to such frivolous claim or defense shall become Executive's sole responsibility and any funds advanced by Company with respect to the same shall be promptly returned to Company by Executive without interest. Any reimbursement of attorneys' fees and related expenses required under this Section 7.12 shall be made by Company upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to Company (but in any event not later than the close of Executive's taxable year following the taxable year in which the fee or expense is incurred by Executive); provided, however, that, upon Executive's termination of employment with Company, in no event shall any additional reimbursement be made prior to the date that is six months after the date of Exec utive's termination of employment to the extent such payment delay is required under Section 409A(a)(2)(B)(i) of the Code. In no event shall any reimbursement be made to Executive for such fees and disbursements incurred after the later of (i) Executive's death or (ii) the date that is ten years after the date of Executive's termination of employment with Company.
VIII.
Definitions
8.1 Definitions. Where the following words and phrases appear in this Agreement, each shall have the respective meaning set forth below, unless the context clearly indicates to the contrary.
(1) "Affiliate" shall mean any entity that owns or controls, is owned or controlled by, or is under common ownership or control with, Core Laboratories N.V.
(2) "Board of Directors" shall mean the Board of Supervisory Directors of Core Laboratories N.V.
(3) "Cause" shall mean Executive has been convicted of any felony or a misdemeanor involving moral turpitude.
(4) "Change in Control" shall mean (i) a merger of Company with another entity, a consolidation involving Company, or the sale of all or substantially all of the assets of Company to another entity if, in any such case, (A) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board of Directors immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of Company or any affiliate of Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if Company has not engaged in a merger or consolidation, Company, or (B) if Company has engaged in a merger or consolidation, the resulting e ntity, or (iv) a change in the composition of the Board of Directors, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board of Directors" shall refer to the board of directors (or comparable governing body) of the resulting entity, and (3 ) "Incumbent Directors" shall mean directors who either (A) are directors of Company as of February 28, 2003, or (B) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or nomination, but Incumbent Director shall not include an individual whose election or nomination occurs as a result of either (A) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or (B) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors. For purposes of this Section 8.1(4), all references to "Company" shall refer solely to Core Laboratories N.V. except as expressly provided in clause (2) of the preceding sentence.
(5) "Change in Control Benefits" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group life insurance plans (or, as the case may be, those plans of the Affiliate at whose offices Executive spends a majority of his working time) shall be provided for Executive and those of Executive's dependents (including Executive's spouse) who were covered under such plans on the day prior to Executive's termination of employment with Company for thirty-six months from the date of such termination at no cost to Executive or Executive's dependents; provided, however, that (1) such coverage shall be subject to all of the terms and conditions of such plans, including, without limitation, the eligibility provisions, (2) such coverage shall terminate if and to the extent Executive or Executive's dependents become covered by the medical, dental, and life insurance plans of a subsequent employer (and any such coverage shall be promptly reported to Company by Executive), (3) if Executive (and/or Executive's spouse) would have been entitled to retiree medical, dental, and/or life insurance coverage under Company's plans (or such Affiliate's plans, as the case may be) had Executive voluntarily retired on the date of such termination, then such coverages shall be continued as provided under such plans, and (4) in the event that continued participation in any such Company plan (or such Affiliate's plan, as the case may be) is not permitted by the terms of such plan, Company shall use its best efforts to arrange, upon comparable terms, benefits substantially equivalent to those that were provided under such Company plan (or such Affiliate's plan, as the case may be). The medical and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or such Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(ii) All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and shall remain exercisable for a period of 12 months thereafter (three months thereafter in the case of Grandfathered Options) or for such greater period as may be provided in the plan or plans pursuant to which any such stock options were granted (but in no event shall any such stock option be exercisable after the earlier of the expiration of the original term of such stock option or the 10th anniversary of the original date of grant of such stock option). For purposes of the preceding sentence, the term "Grandfathered Options" means (1) each stock option granted by Company to Executive on or before February 28, 2003, with respect to which the purchase price per share under such stock option is less than the Fair Market Value (as such term is defined in the Core Laboratories N.V. 1995 Long-T erm Incentive Plan, as amended) per share as of February 28, 2003 and (2) each other stock option granted by Company to Executive on or before February 28, 2003, that qualifies as an incentive stock option (within the meaning of Section 422 of the Code) and which would cease to qualify as such an incentive stock option if the period during which such stock option could be exercised after termination of employment was extended from three months to 12 months as provided in the preceding sentence.
(iii) Company shall provide Executive with reasonable outplacement services at a cost not to exceed 100% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company; provided, however, that such outplacement services shall in no event be provided beyond the last day of the second taxable year of Executive following the taxable year of Executive in which Executive's termination of employment with Company occurred.
(iv) Notwithstanding the coverage therefor under any other provision hereof including clause (i) above, (provided that in no case shall this subsection require Company to provide duplicative benefits coverage under its own programs), Executive shall be provided a benefits package (for so long as Executive or Executive's spouse or dependent children shall live) including medical, hospital, dental, disability and life insurance plans and coverage (including supplemental insurance plans and coverage) for Executive and Executive's spouse and dependent children at least as favorable (including premium payments no higher than the lowest employee cost of such coverage) to Executive (and Executive's spouse and/or dependent children) as those provided immediately prior to termination unless, with respect to any particular plan or coverage, the continuation of such existing plan or coverage would have material adverse financial or regulatory consequences for the Company, in which case the plan or coverage will be provided through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual coverage at its expense. If the receipt of any benefit or payment under this clause (iv) ("Benefit") is taxable to Executive, then Company shall pay to Executive, within 60 days after the end of each taxable year of Executive, an additional amount in cash ("Additional Payment") equal to all taxes (including any interest or penalties imposed with respect to such taxes) Executive incurs with respect to such Benefit for such taxable year and any Additional Payment received by Executive during such taxable year. The medical, hospital and dental coverage described in the first sentence of this clause (iv) shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage u nder Company's plans (or an Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(6) "Change in Control Payment" shall mean a lump sum payment in an amount equal to three times the sum of (i) Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company and (ii) the greater of (x) the highest annual bonus earned by Executive during any of the last three fiscal years of Company ending prior to the Change in Control, and (y) 45% of the maximum annual incentive bonus amount pursuant to Section 2.2 that Executive could have earned for the year during which Executive's employment with Company terminates.
(7) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(8) "Committee" shall mean the Compensation Committee of the Board of Directors.
(9) "Company" shall mean Core Laboratories N.V. and its Affiliates.
(10) "Effective Date" shall mean August 1, 2007.
(11) "Executive" shall mean David M. Demshur.
(12) "Good Reason" shall mean termination by Executive of Executive's employment with Company within sixty days of and in connection with or due to (i) a significant change in the nature, status, or scope of Executive's duties, responsibilities, or authorities, (ii) a permanent change and relocation of Executive's principal place of employment with Company, which is more than fifty miles away from the prior location, (iii) a material breach by Company of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice of such breach by Executive to Company, (iv) a material diminution in Executive's participation in bonus, stock option, incentive award, and other compensation plans provided by Company for executives with comparable duties, (v) a material diminution in employee benefits (including but not limited to medical, dental, life insurance, and long-term disability plans) and perquisites applicable to Executive from the employee benefits and perquisites provided by Company to executives with comparable duties, or (vi) in Executive's sole judgment, the scope of Executive's position or continued employment within Company being no longer appropriate.
(13) "Grandfathered Severance Amount" shall mean $1,474,000, which amount is equal to the "Termination Payment" that Executive would have received pursuant to the terms of the Prior Employment Agreement if Executive had voluntarily terminated his employment with the Company (for any reason whatsoever or for no reason) on December 31, 2004.
(14) "Prior Employment Agreement" shall mean that certain Employment Agreement between Core Laboratories N.V. and Executive that was restated as of December 31, 2001, as amended.
(15) "Severance Benefits" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group life insurance plans (or, as the case may be, those of the Affiliate at whose offices Executive spends a majority of his working time) shall be provided for Executive and those of Executive's dependents (including Executive's spouse) who were covered under such plans on the day prior to Executive's termination of employment with Company for thirty-six months from the date of such termination at no cost to Executive or Executive's dependents; provided, however, that (1) such coverage shall be subject to all of the terms and conditions of such plans, including, without limitation, eligibility provisions, (2) such coverage shall terminate if and to the extent Executive or Executive's dependents become covered by the medical, dental, and life insurance plans of a subsequent employer (and any such coverage shall be promptly reported to Company by Executive), (3) if Executive (and/or Executive's spouse) would have been enti tled to retiree medical, dental, and/or life insurance coverage under Company's plans (or such Affiliate's plans, as the case may be) had Executive voluntarily retired on the date of such termination, then such coverages shall be continued as provided under such plans), and (4) in the event that continued participation in any such Company plan is not permitted by the terms of such plan, Company shall use its best efforts to arrange, upon comparable terms, benefits substantially equivalent to those that were provided under such Company plan (or such Affiliate's plan, as the case may be). The medical and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or such Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(ii) All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and for a period of three months thereafter or for such greater period as may be provided in the plan or plans pursuant to which such stock options were granted (but in no event shall any such stock option be exercisable after the earlier of the expiration of the original term of such stock option or the 10th anniversary of the original date of grant of such stock option).
(iii) Company shall provide Executive with reasonable outplacement services at a cost not to exceed 100% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company; provided, however, that such outplacement services shall in no event be provided beyond the last day of the second taxable year of Executive following the taxable year of Executive in which Executive's termination of employment with Company occurred.
(iv) Notwithstanding the coverage therefor under any other provision hereof including clause (i) above, (provided that in no case shall this subsection require Company to provide duplicative benefits coverage under its own programs), Executive shall be provided a benefits package (for so long as Executive or Executive's spouse or dependent children shall live) including medical, hospital, dental, disability and life insurance plans and coverage (including supplemental insurance plans and coverage) for Executive and Executive's spouse and dependent children at least as favorable (including premium payments no higher than the lowest employee cost of such coverage) to Executive (and Executive's spouse and/or dependent children) as those provided immediately prior to termination unless, with respect to any particular plan or coverage, the continuation of such existing plan or coverage would have material adverse financial or regulatory consequences for the Company, in which case the plan or coverage will be provided through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual coverage at its expense. The medical, hospital and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or an Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(16) "Termination Payment" shall mean a lump sum payment in an amount equal to the sum of (i) 200% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company and (ii) two times 45% of the maximum annual incentive bonus amount pursuant to Section 2.2 that Executive could have earned for the year during which Executive's employment with Company terminates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 5th day of March, 2008, to be effective as of the Effective Date.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
By: /s/ JAN WILLEM SODDERLAND
Jan Willem Sodderland
Managing Director of
Core Laboratories International B.V.
EXECUTIVE
/s/ David M. Demshur
David M. Demshur
Houston 3332780v1
Employment Agreement
(Restated as of December 31, 2007)
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made by and between CORE LABORATORIES N.V. and Richard L. Bergmark ("Executive").
W
I T N E S S E T H:WHEREAS, Executive is currently an employee of Core Laboratories N.V. and/or one or more of its Affiliates ("Company"); and
WHEREAS, the Company desires to continue to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth, and Executive is desirous of continuing to be employed by Company on such terms and conditions, and for such consideration;
NOW, THEREFORE, for and in consideration of the amounts and benefits to be paid and provided to Executive under this Agreement and the mutual promises, covenants, and undertakings contained herein, Core Laboratories N.V. and Executive, each intending to be legally bound, hereby agree as follows:
I.
Employment and Duties
1.1 Employment; Effective Date. Company agrees to employ Executive, and Executive agrees to be employed by Company, beginning as of the Effective Date and continuing for the period of time set forth in Article III of this Agreement, subject to the terms and conditions of this Agreement.
1.2 Position. From and after the Effective Date, Company shall employ Executive in the position of Chief Financial Officer of Company, or in such other comparable executive position as Company and Executive may mutually agree.
1.3 Duties and Services. Executive agrees to serve in the position referred to in Section 1.2 and to perform diligently and to the best of Executive's abilities the duties and services appertaining to such office, as well as such additional duties and services appropriate to such office upon which the parties mutually may agree from time to time. Executive's employment shall also be subject to the policies maintained and established by Company, as the same may be amended from time to time.
1.4 Other Interests. Executive agrees, during the period of Executive's employment by Company, to devote Executive's primary business time, energy, and best efforts to the business and affairs of Company and its Affiliates and not to engage, directly or indirectly, in any other business or businesses, whether or not similar to that of Company, except with the consent of the Board of Directors. The foregoing notwithstanding, the parties recognize and agree that Executive may, without consent of the Board of Directors, engage in charitable, civic, and other business activities that do not conflict with the business and affairs of Company and in passive personal investments, so long as such activities do not interfere with Executive's performance of Executive's duties hereunder.
1.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the best interests of Company. In keeping with these duties, Executive shall make full disclosure to Company of all business opportunities pertaining to Company's business and shall not appropriate for Executive's own benefit business opportunities concerning the subject matter of the fiduciary relationship.
II.
Compensation and Benefits
2.1 #9; Base Salary. During the period of this Agreement, Executive shall receive a minimum annual base salary of $380,000. Executive's annual base salary shall be reviewed by the Board of Directors (or a committee thereof) on an annual basis, and, in the sole discretion of the Board of Directors (or such committee), such annual base salary may be increased, but not decreased no less than once every calendar year. Executive's annual base salary shall be paid in equal installments in accordance with the Company's standard policy regarding payment of compensation to executives but no less frequently than monthly.
2.2 Bonuses. Executive shall be eligible to receive an annual bonus of up to 100% of Executive's annual base salary with the amount of such bonus to be determined by the Committee based upon criteria established from time to time by the Committee.
2.3 Employee Benefits. Executive and, to the extent applicable, Executive's spouse, dependents, and beneficiaries shall be allowed to participate in all benefits, plans, and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to other executive employees of Company (or such Affiliate at whose offices Executive spends a majority of his working time, as the case may be). Such benefits, plans, and programs shall include, without limitation, any deferred compensation plan, matching share program, performance share program, profit sharing plan, thrift plan, health insurance or health care plan, life insurance (including any available supplemental insurance), disability insurance (including any available supplemental insurance), pension plan, supplemental retirement plan, stock option plan, vacation and sick leave plan, and the like which may be maintained by Company (or such Affiliate, as the case may be) for Execut ive specifically or for employees of Executive's seniority and position generally. Company shall not, however, by reason of this Section be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such benefit, plan, or program, so long as such changes are similarly applicable to executive employees specifically, and no worse than all other employees generally; provided, however, that in the case of any discontinuation of any such benefit, plan or program, Company shall continue to provide such benefit or coverage through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual benefits or coverage at its expense.
2.4 Business and Entertainment Expenses. During his employment hereunder, subject to Company's standard policies and procedures with respect to expense reimbursement as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business-related purposes, including, but not limited to, dues and fees to industry and professional organizations and costs of entertainment and business development.
2.5 Indemnification. Company agrees to indemnify Executive against any and all liabilities arising out of Executive's employment duties to the extent such liabilities are not covered by any insurance maintained by Company or Executive, including any liabilities that are caused by or result from an act or omission constituting the negligence of Executive in the performance of such duties, but excluding liabilities that are caused by or result from Executive's own gross negligence or willful misconduct.
III.
Term and Termination of Employment
3.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date. Said term of employment shall be extended automatically for an additional successive three-year period as of each annual anniversary date of the Effective Date that occurs while this Agreement is in effect; provided, however, that if, at any time prior to any such anniversary date of the Effective Date, either party shall give written notice to the other that no such automatic extension shall occur, then Executive's employment shall terminate on the last day of the three-year period beginning on the annual anniversary date of the Effective Date that next occurs after such notice is given.
3.2 Company's Right to Terminate. Notwithstanding the provisions of Section 3.1, Company shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons:
(i) Upon Executive's death;
(ii) Upon Executive's becoming incapacitated by accident, sickness, or other circumstance that renders Executive mentally or physically incapable of performing the duties and services required of Executive hereunder on a full-time basis for a period of at least 180 consecutive calendar days;
(iii) For Cause;
(iv) For Executive's material breach of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice to Executive by Company of such breach; or
(v) For any other reason whatsoever, in the sole discretion of the Board of Directors.
3.3 Executive's Right to Terminate. Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons:
(i) A material breach by Company of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice of such breach by Executive to Company;
(ii) For Good Reason; or
(iii) For any other reason whatsoever, in the sole discretion of Executive.
3.4 Notice of Termination. If Company or Executive desires to terminate Executive's employment hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, Company or Executive shall do so by giving written notice of such termination to the other party and stating the effective date and reason for such termination; provided, however, that no such action shall alter or amend any other provisions hereof or rights arising hereunder, including, without limitation, the provisions of Articles V and VI hereof. For all purposes of this Agreement, Executive shall be considered to have terminated employment with Company when Executive incurs a "separation from service" with Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.
IV.
Effect of Termination of Employment
4.1 Termination By Expiration of Term. If Executive's employment hereunder shall terminate upon expiration of the term provided in Section 3.1 hereof, all compensation and all benefits to Executive hereunder shall terminate contemporaneously with termination of Executive's employment, except for such benefits as may be required by law.
4.2 Termination By Company. If Executive's employment hereunder shall be terminated by Company prior to expiration of the term provided in Section 3.1, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment; provided, however, that if such termination shall be for any reason other than those encompassed by Section 3.2(i), 3.2(ii), 3.2(iii), or 3.2(iv), Company shall (i) pay Executive a Termination Payment and (ii) provide Executive with Severance Benefits; provided further, however, that if termination is pursuant to Section 3.2(i) or 3.2(ii), the Company will provide Employee's spouse and dependent children with the benefits covered under Section 8.1(15)(iv); and provided further that all outstanding stock options granted by Company to Executive shall immediately become fully vested and immediately exercisable in full as provided under Section 8.1(15)(ii). The Termination Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the prime rate of interest published in The Wall Street Journal on the date of termination of Executive's employment (or if not published on that date, on the next following date when published) (the "Section 409A Interest Rate")) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the earlier of the date of Executive's death or the date that is six (6) months after the date of termination of Executive's employment (the "Section 409A Paymen t Date"). Executive hereby agrees to be bound by Company's determination of its "specified employees" (as such term is defined in Section 409A of the Code) in accordance with any of the methods permitted under the regulations issued under Section 409A of the Code.
4.3 Termination By Executive. If Executive's employment hereunder shall be terminated by Executive prior to expiration of the term provided in Section 3.1, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment; provided, however, that Company shall (i) pay Executive a Termination Payment and (ii) provide Executive with Severance Benefits. The Termination Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the Section 409A Interest Rate) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the Section 409A Payment Date.
4.4 Change in Control. If, within three (3) years following the occurrence of a Change in Control, Executive's employment with Company shall terminate for any reason, then, in lieu of any Termination Payment or Severance Benefits pursuant to Section 4.2 or 4.3, Company shall (1) pay Executive a Change in Control Payment and (2) provide Executive with Change in Control Benefits. The Change in Control Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the Section 409A Interest Rate) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the Section 409A Payment Date.
4.5 Parachute Payment Gross Up. Notwithstanding anything to the contrary in this Agreement, in the event that any payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive an additional payment (a "Gross-up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed on any Gross-up Payment, Executive retains an amount of the Gross-up Payment equal to the Excise Tax imposed upon the Payments. The Gross-up P ayment attributable to a particular Payment shall be made at the time such Payment is made; provided, however, that in no event shall the Gross-up Payment be made later than the end of Executive's taxable year next following Executive's taxable year in which Executive remits the related taxes. Executive shall notify Company in writing of any claim by the Internal Revenue Service which, if successful, would require Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially determined by Company) within ten days of the receipt of such claim. Company shall notify Executive in writing at least ten days prior to the due date of any response required with respect to such claim if it plans to contest the claim. If Company decides to contest such claim, Executive shall cooperate fully with Company in such action; provided, however, Company shall bear and pay directly or indirectly all costs and expenses (including additional interest and penalties) incurred in connection with s uch action and shall indemnify and hold 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 Company's action. If, as a result of Company's action with respect to a claim, Executive receives a refund of any amount paid by Company with respect to such claim, Executive shall promptly pay such refund to Company. If Company fails to timely notify Executive whether it will contest such claim, or if Company determines not to contest such claim, Company shall immediately pay to Executive the portion of such claim, if any, which it has not previously paid to Executive. All determinations required to be made under this Section 4.5, including, without limitation, 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 the independent public accounting firm used by Company immediately prior to the C hange in Control for purposes of preparing Company's audited financial statements. However, in the event such accounting firm is also serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder.
4.6 #9; No Duty to Mitigate Losses. Executive shall have no duty to find new employment following the termination of Executive's employment under circumstances that require Company to pay any amount to Executive pursuant to this Article IV. Any salary or remuneration received by Executive from a third party for the providing of personal services (whether by employment or by functioning as an independent contractor) following the termination of Executive's employment under circumstances pursuant to which this Article IV apply shall not reduce Company's obligation to make a payment to Executive (or the amount of any such payment) pursuant to the terms of this Article IV.
4.7 Liquidated Damages. In light of the difficulties in estimating the damages for an early termination of this Agreement, Company and Executive hereby agree that the payments, if any, to be received by Executive pursuant to this Article IV shall be received by Executive as liquidated damages and not as a penalty.
4.8 Other Compensation Programs. This Agreement governs the rights and obligations of Executive and Company with respect to Executive's annual base salary and certain perquisites of employment. Executive's rights and obligations both during the term of Executive's employment and thereafter with respect to stock options, restricted stock, incentive and deferred compensation, life insurance policies insuring the life of Executive, and other benefits under plans and programs maintained by Company shall be governed by the separate agreements, plans, programs, and other documents and instruments governing such matters, or as may be provided by law.
V.
Protection of Information
5.1 Disclosure to Executive. Company shall (i) disclose to Executive, or place Executive in a position to have access to or develop, trade secrets or confidential information of Company or its Affiliates, and/or (ii) entrust Executive with business opportunities of Company or its Affiliates, and/or (iii) place Executive in a position to develop business good will on behalf of Company or its Affiliates.
5.2 Disclosure to and Property of Company. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed, or acquired by Executive, individually or in conjunction with others, during Executive's employment by Company (whether during business hours or otherwise and whether on Company's premises or otherwise) that relate to Company's business, products, or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisitions prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Company and are and shall be the sole and exclusive property of Compan y. Moreover, all documents, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Company. Upon termination of Executive's employment by Company, for any reason, Executive promptly shall deliver the same, and all copies thereof, to Company.
5.3 No Unauthorized or Damaging Use or Disclosure. Executive will not, at any time during or after Executive's employment by Company, make any unauthorized disclosure of any confidential business information or trade secrets of Company or its Affiliates, or make any use thereof, except in the carrying out of Executive's employment responsibilities hereunder. Affiliates of the Company shall be third party beneficiaries of Executive's obligations under this Section. As a result of Executive's employment by Company, Executive may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Company and its Affiliates. Executive also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Company's confidential business information a nd trade secrets. Executive shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives (i) that are slanderous, libelous, or defamatory, or (ii) that disclose private or confidential information about Company, any of its Affiliates, or any of such entities' business affairs, officers, employees, agents, or representatives, or (iii) that constitute an intrusion into the seclusion or private lives of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives, or (iv) that give rise to unreasonable publicity about the private lives of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives, or (v) that place Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives in a false light before the public, or (vi) that constitute a misappropriation of the name or likeness of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined by the courts.
5.4 Ownership by Company. If, during Executive's employment by Company, Executive creates any work of authorship fixed in any tangible medium of expression, which is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Company's business, products, or services, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on Company's premises or otherwise), Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executive's employment; or, if the work is not prepared by Executive within the scope of Executive's employment but is specially ordered by Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translat ion, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Company shall be the author of the work. If such work is neither prepared by Executive within the scope of Executive's employment nor a work specially ordered that is deemed to be a work made for hire, then Executive hereby agrees to assign, and by these presents does assign, to Company all of Executive's worldwide right, title, and interest in and to such work and all rights of copyright therein.
5.5 Assistance by Executive. Both during the period of Executive's employment by Company and thereafter, Executive shall assist Company and its nominee, at any time, in the protection of Company's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries.
5.6 Remedies. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by Executive, and Company shall be entitled to enforce the provisions of this Article by terminating any and all payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to Company, including the recovery of damages from Executive and his agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.
VI.
Noncompetition Obligation
6.1 In General. As part of the consideration for the compensation and benefits to be paid to Executive hereunder; to protect the trade secrets and confidential information of Company and its Affiliates that have been and will in the future be disclosed or entrusted to Executive, the business good will of Company and its Affiliates that has been and will in the future be developed in Executive, or the business opportunities that have been and will in the future be disclosed or entrusted to Executive by Company and its Affiliates; and, as an additional incentive for Company to enter into this Agreement, Company and Executive agree to the noncompetition obligations hereunder. Executive shall not, directly or indirectly for Executive or for others, in any geographic area or market where Company or any of its Affiliates are conducting any business as of the date of the termination of the employment relationship or have during the previous twelve months conducted such busi ness:
(i) Engage in any business competitive with the business conducted by Company;
(ii) Provide comparable services to any other person, association, or entity who is primarily engaged in any business competitive with the business conducted by Company with respect to such competitive business; or
(iii) Induce any employee of Company or any of its Affiliates to terminate his or her employment with Company or such Affiliates, or hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Company.
The restrictions placed on Executive by this Section 6.1 shall apply during the period that Executive is employed by Company and for the two-year period thereafter if Executive's employment with Company is terminated for any reason other than (a) by Executive for a Good Reason or (b) by Company without Cause. Notwithstanding the foregoing, from and after the date upon which a Change in Control occurs, such restrictions shall cease to apply to Executive except for any period during which he is employed by Company.
6.2 Enforcement and Remedies. Executive understands that the restrictions set forth in Section 6.1 may limit Executive's ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Executive will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by Executive, and Company shall be entitled to enforce the provisions of this Article by terminating any payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to Company, including without limitation, the recovery of damages from Executive and E xecutive's agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.
6.3 Reformation. It is expressly understood and agreed that Company and Executive consider the restrictions contained in this Article to be reasonable and necessary to protect the proprietary information of Company. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such court so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.
VII.
Miscellaneous
7.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Company to: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Attention: Managing Director
cc: General Counsel
Core Laboratories, Inc.
6316 Windfern
Houston, Texas 77040
If to Executive to: Richard L. Bergmark
c/o 6316 Windfern
Houston, Texas 77040
or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.
7.2 Applicable Law. This Agreement is entered into under, and shall be governed for all purposes by, the laws of the state of Texas, except as may be preempted by federal law.
7.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
7.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.
7.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
7.6 Withholding of Taxes and Other Employee Deductions. Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city, and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company's employees generally.
7.7 Headings. The Article and Section headings herein have been inserted for purposes of convenience only and shall not be used for interpretive purposes.
7.8 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.
7.9 Assignment. This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or otherwise. Except as provided in the preceding sentence, this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit, or obligation of either party hereto shall be subject to voluntary or involuntary assignment, alienation, or transfer, whether by operation of law or otherwise, without the prior written consent of the other party.
7.10 Term. This Agreement has a term co-extensive with the term of employment provided in Section 3.1. Termination shall not affect any right or obligation of any party which is accrued or vested prior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles V and VI shall survive any termination of the employment relationship and/or of this Agreement.
7.11 Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties, and agreements between the parties with respect to employment of Executive by Company. Without limiting the scope of the preceding sentence, all prior understandings and agreements among the parties hereto relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement) are hereby null and void and of no further force and effect. Any modification of this Agreement will be effective only if it is in writing and signed by the party to be charged.
7.12 Legal Fees and Expenses. It is the intent of Company that Executive not be required to bear any legal fees or related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement (by litigation or otherwise) with respect to any termination of his employment on or after a Change in Control. Accordingly, if it should appear to Executive that Company has failed to comply with any of its obligations under this Agreement or in the event that Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Executive any benefit provided or intended to be provided to Executive hereunder, in each case with respect to his rights or obligations upon or following a termination of his employment on or after a Change in Control, then Company irrevocably authorizes the Executive fro m time to time to retain counsel of Executive's choice, at the expense of Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, including, without limitation, the initiation or defense of any litigation or other legal action, whether by or against Company or any director, officer, stockholder or other person affiliated with Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between Company and such counsel, Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection Company and Executive agree that a confidential relationship will exist between Executive and such counsel. Without regard to whether Executive prevails, in whole or in part, in connection with any of the foregoing, Company will pay and be solely financially responsible for any and all attorneys' fees and related expenses incurred by Executive in connection with any of the fo regoing, except to the extent that a final judgment no longer subject to appeal finds that a claim or defense asserted by Executive was frivolous. In such a case, the portion of such fees and expenses incurred by Executive attributable to such frivolous claim or defense shall become Executive's sole responsibility and any funds advanced by Company with respect to the same shall be promptly returned to Company by Executive without interest. Any reimbursement of attorneys' fees and related expenses required under this Section 7.12 shall be made by Company upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to Company (but in any event not later than the close of Executive's taxable year following the taxable year in which the fee or expense is incurred by Executive); provided, however, that, upon Executive's termination of employment with Company, in no event shall any additional reimbursement be made prior to the date that is six months after the date of Exec utive's termination of employment to the extent such payment delay is required under Section 409A(a)(2)(B)(i) of the Code. In no event shall any reimbursement be made to Executive for such fees and disbursements incurred after the later of (i) Executive's death or (ii) the date that is ten years after the date of Executive's termination of employment with Company.
VIII.
Definitions
8.1 Definitions. Where the following words and phrases appear in this Agreement, each shall have the respective meaning set forth below, unless the context clearly indicates to the contrary.
(1) "Affiliate" shall mean any entity that owns or controls, is owned or controlled by, or is under common ownership or control with, Core Laboratories N.V.
(2) "Board of Directors" shall mean the Board of Supervisory Directors of Core Laboratories N.V.
(3) "Cause" shall mean Executive has been convicted of any felony or a misdemeanor involving moral turpitude.
(4) "Change in Control" shall mean (i) a merger of Company with another entity, a consolidation involving Company, or the sale of all or substantially all of the assets of Company to another entity if, in any such case, (A) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board of Directors immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of Company or any affiliate of Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if Company has not engaged in a merger or consolidation, Company, or (B) if Company has engaged in a merger or consolidation, the resulting e ntity, or (iv) a change in the composition of the Board of Directors, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board of Directors" shall refer to the board of directors (or comparable governing body) of the resulting entity, and (3 ) "Incumbent Directors" shall mean directors who either (A) are directors of Company as of February 28, 2003, or (B) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or nomination, but Incumbent Director shall not include an individual whose election or nomination occurs as a result of either (A) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or (B) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors. For purposes of this Section 8.1(4), all references to "Company" shall refer solely to Core Laboratories N.V. except as expressly provided in clause (2) of the preceding sentence.
(5) "Change in Control Benefits" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group life insurance plans (or, as the case may be, those plans of the Affiliate at whose offices Executive spends a majority of his working time) shall be provided for Executive and those of Executive's dependents (including Executive's spouse) who were covered under such plans on the day prior to Executive's termination of employment with Company for thirty-six months from the date of such termination at no cost to Executive or Executive's dependents; provided, however, that (1) such coverage shall be subject to all of the terms and conditions of such plans, including, without limitation, the eligibility provisions, (2) such coverage shall terminate if and to the extent Executive or Executive's dependents become covered by the medical, dental, and life insurance plans of a subsequent employer (and any such coverage shall be promptly reported to Company by Executive), (3) if Executive (and/or Executive's spouse) would have been entitled to retiree medical, dental, and/or life insurance coverage under Company's plans (or such Affiliate's plans, as the case may be) had Executive voluntarily retired on the date of such termination, then such coverages shall be continued as provided under such plans, and (4) in the event that continued participation in any such Company plan (or such Affiliate's plan, as the case may be) is not permitted by the terms of such plan, Company shall use its best efforts to arrange, upon comparable terms, benefits substantially equivalent to those that were provided under such Company plan (or such Affiliate's plan, as the case may be). The medical and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or such Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(ii) All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and shall remain exercisable for a period of 12 months thereafter (three months thereafter in the case of Grandfathered Options) or for such greater period as may be provided in the plan or plans pursuant to which any such stock options were granted (but in no event shall any such stock option be exercisable after the earlier of the expiration of the original term of such stock option or the 10th anniversary of the original date of grant of such stock option). For purposes of the preceding sentence, the term "Grandfathered Options" means (1) each stock option granted by Company to Executive on or before February 28, 2003, with respect to which the purchase price per share under such stock option is less than the Fair Market Value (as such term is defined in the Core Laboratories N.V. 1995 Long-T erm Incentive Plan, as amended) per share as of February 28, 2003 and (2) each other stock option granted by Company to Executive on or before February 28, 2003, that qualifies as an incentive stock option (within the meaning of Section 422 of the Code) and which would cease to qualify as such an incentive stock option if the period during which such stock option could be exercised after termination of employment was extended from three months to 12 months as provided in the preceding sentence.
(iii) Company shall provide Executive with reasonable outplacement services at a cost not to exceed 100% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company; provided, however, that such outplacement services shall in no event be provided beyond the last day of the second taxable year of Executive following the taxable year of Executive in which Executive's termination of employment with Company occurred.
(iv) Notwithstanding the coverage therefor under any other provision hereof including clause (i) above, (provided that in no case shall this subsection require Company to provide duplicative benefits coverage under its own programs), Executive shall be provided a benefits package (for so long as Executive or Executive's spouse or dependent children shall live) including medical, hospital, dental, disability and life insurance plans and coverage (including supplemental insurance plans and coverage) for Executive and Executive's spouse and dependent children at least as favorable (including premium payments no higher than the lowest employee cost of such coverage) to Executive (and Executive's spouse and/or dependent children) as those provided immediately prior to termination unless, with respect to any particular plan or coverage, the continuation of such existing plan or coverage would have material adverse financial or regulatory consequences for the Company, in which case the plan or coverage will be provided through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual coverage at its expense. If the receipt of any benefit or payment under this clause (iv) ("Benefit") is taxable to Executive, then Company shall pay to Executive, within 60 days after the end of each taxable year of Executive, an additional amount in cash ("Additional Payment") equal to all taxes (including any interest or penalties imposed with respect to such taxes) Executive incurs with respect to such Benefit for such taxable year and any Additional Payment received by Executive during such taxable year. The medical, hospital and dental coverage described in the first sentence of this clause (iv) shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage u nder Company's plans (or an Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(6) "Change in Control Payment" shall mean a lump sum payment in an amount equal to three times the sum of (i) Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company and (ii) the greater of (x) the highest annual bonus earned by Executive during any of the last three fiscal years of Company ending prior to the Change in Control, and (y) 45% of the maximum annual incentive bonus amount pursuant to Section 2.2 that Executive could have earned for the year during which Executive's employment with Company terminates.
(7) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(8) "Committee" shall mean the Compensation Committee of the Board of Directors.
(9) "Company" shall mean Core Laboratories N.V. and its Affiliates.
(10) "Effective Date" shall mean August 1, 2007.
(11) "Executive" shall mean Richard L. Bergmark.
(12) "Good Reason" shall mean termination by Executive of Executive's employment with Company within sixty days of and in connection with or due to (i) a significant change in the nature, status, or scope of Executive's duties, responsibilities, or authorities, (ii) a permanent change and relocation of Executive's principal place of employment with Company, which is more than fifty miles away from the prior location, (iii) a material breach by Company of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice of such breach by Executive to Company, (iv) a material diminution in Executive's participation in bonus, stock option, incentive award, and other compensation plans provided by Company for executives with comparable duties, (v) a material diminution in employee benefits (including but not limited to medical, dental, life insurance, and long-term disability plans) and perquisites applicable to Executive from the employee benefits and perquisites provided by Company to executives with comparable duties, or (vi) in Executive's sole judgment, the scope of Executive's position or continued employment within Company being no longer appropriate.
(13) "Grandfathered Severance Amount" shall mean $783,000, which amount is equal to the "Termination Payment" that Executive would have received pursuant to the terms of the Prior Employment Agreement if Executive had voluntarily terminated his employment with the Company (for any reason whatsoever or for no reason) on December 31, 2004.
(14) "Prior Employment Agreement" shall mean that certain Employment Agreement between Core Laboratories N.V. and Executive that was restated as of December 31, 2001, as amended.
(15) "Severance Benefits" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group life insurance plans (or, as the case may be, those of the Affiliate at whose offices Executive spends a majority of his working time) shall be provided for Executive and those of Executive's dependents (including Executive's spouse) who were covered under such plans on the day prior to Executive's termination of employment with Company for thirty-six months from the date of such termination at no cost to Executive or Executive's dependents; provided, however, that (1) such coverage shall be subject to all of the terms and conditions of such plans, including, without limitation, eligibility provisions, (2) such coverage shall terminate if and to the extent Executive or Executive's dependents become covered by the medical, dental, and life insurance plans of a subsequent employer (and any such coverage shall be promptly reported to Company by Executive), (3) if Executive (and/or Executive's spouse) would have been enti tled to retiree medical, dental, and/or life insurance coverage under Company's plans (or such Affiliate's plans, as the case may be) had Executive voluntarily retired on the date of such termination, then such coverages shall be continued as provided under such plans), and (4) in the event that continued participation in any such Company plan is not permitted by the terms of such plan, Company shall use its best efforts to arrange, upon comparable terms, benefits substantially equivalent to those that were provided under such Company plan (or such Affiliate's plan, as the case may be). The medical and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or such Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(ii) All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and for a period of three months thereafter or for such greater period as may be provided in the plan or plans pursuant to which such stock options were granted (but in no event shall any such stock option be exercisable after the earlier of the expiration of the original term of such stock option or the 10th anniversary of the original date of grant of such stock option).
(iii) Company shall provide Executive with reasonable outplacement services at a cost not to exceed 100% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company; provided, however, that such outplacement services shall in no event be provided beyond the last day of the second taxable year of Executive following the taxable year of Executive in which Executive's termination of employment with Company occurred.
(iv) Notwithstanding the coverage therefor under any other provision hereof including clause (i) above, (provided that in no case shall this subsection require Company to provide duplicative benefits coverage under its own programs), Executive shall be provided a benefits package (for so long as Executive or Executive's spouse or dependent children shall live) including medical, hospital, dental, disability and life insurance plans and coverage (including supplemental insurance plans and coverage) for Executive and Executive's spouse and dependent children at least as favorable (including premium payments no higher than the lowest employee cost of such coverage) to Executive (and Executive's spouse and/or dependent children) as those provided immediately prior to termination unless, with respect to any particular plan or coverage, the continuation of such existing plan or coverage would have material adverse financial or regulatory consequences for the Company, in which case the plan or coverage will be provided through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual coverage at its expense. The medical, hospital and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or an Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(16) "Termination Payment" shall mean a lump sum payment in an amount equal to the sum of (i) 200% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company and (ii) two times 45% of the maximum annual incentive bonus amount pursuant to Section 2.2 that Executive could have earned for the year during which Executive's employment with Company terminates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 5th day of March, 2008, to be effective as of the Effective Date.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
By: /s/ JAN WILLEM SODDERLAND
Jan Willem Sodderland
Managing Director of
Core Laboratories International B.V.
EXECUTIVE
/s/ Richard L. Bergmark
Richard L. Bergmark
Houston 3332780v1
Employment Agreement
(Restated as of December 31, 2007)
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made by and between CORE LABORATORIES N.V. and Monty L. Davis ("Executive").
W
I T N E S S E T H:WHEREAS, Executive is currently an employee of Core Laboratories N.V. and/or one or more of its Affiliates ("Company"); and
WHEREAS, the Company desires to continue to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth, and Executive is desirous of continuing to be employed by Company on such terms and conditions, and for such consideration;
NOW, THEREFORE, for and in consideration of the amounts and benefits to be paid and provided to Executive under this Agreement and the mutual promises, covenants, and undertakings contained herein, Core Laboratories N.V. and Executive, each intending to be legally bound, hereby agree as follows:
I.
Employment and Duties
1.1 Employment; Effective Date. Company agrees to employ Executive, and Executive agrees to be employed by Company, beginning as of the Effective Date and continuing for the period of time set forth in Article III of this Agreement, subject to the terms and conditions of this Agreement.
1.2 Position. From and after the Effective Date, Company shall employ Executive in the position of Chief Operating Officer of Company, or in such other comparable executive position as Company and Executive may mutually agree.
1.3 Duties and Services. Executive agrees to serve in the position referred to in Section 1.2 and to perform diligently and to the best of Executive's abilities the duties and services appertaining to such office, as well as such additional duties and services appropriate to such office upon which the parties mutually may agree from time to time. Executive's employment shall also be subject to the policies maintained and established by Company, as the same may be amended from time to time.
1.4 Other Interests. Executive agrees, during the period of Executive's employment by Company, to devote Executive's primary business time, energy, and best efforts to the business and affairs of Company and its Affiliates and not to engage, directly or indirectly, in any other business or businesses, whether or not similar to that of Company, except with the consent of the Board of Directors. The foregoing notwithstanding, the parties recognize and agree that Executive may, without consent of the Board of Directors, engage in charitable, civic, and other business activities that do not conflict with the business and affairs of Company and in passive personal investments, so long as such activities do not interfere with Executive's performance of Executive's duties hereunder.
1.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the best interests of Company. In keeping with these duties, Executive shall make full disclosure to Company of all business opportunities pertaining to Company's business and shall not appropriate for Executive's own benefit business opportunities concerning the subject matter of the fiduciary relationship.
II.
Compensation and Benefits
2.1 #9; Base Salary. During the period of this Agreement, Executive shall receive a minimum annual base salary of $370,000. Executive's annual base salary shall be reviewed by the Board of Directors (or a committee thereof) on an annual basis, and, in the sole discretion of the Board of Directors (or such committee), such annual base salary may be increased, but not decreased no less than once every calendar year. Executive's annual base salary shall be paid in equal installments in accordance with the Company's standard policy regarding payment of compensation to executives but no less frequently than monthly.
2.2 Bonuses. Executive shall be eligible to receive an annual bonus of up to 100% of Executive's annual base salary with the amount of such bonus to be determined by the Committee based upon criteria established from time to time by the Committee.
2.3 Employee Benefits. Executive and, to the extent applicable, Executive's spouse, dependents, and beneficiaries shall be allowed to participate in all benefits, plans, and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to other executive employees of Company (or such Affiliate at whose offices Executive spends a majority of his working time, as the case may be). Such benefits, plans, and programs shall include, without limitation, any deferred compensation plan, matching share program, performance share program, profit sharing plan, thrift plan, health insurance or health care plan, life insurance (including any available supplemental insurance), disability insurance (including any available supplemental insurance), pension plan, supplemental retirement plan, stock option plan, vacation and sick leave plan, and the like which may be maintained by Company (or such Affiliate, as the case may be) for Execut ive specifically or for employees of Executive's seniority and position generally. Company shall not, however, by reason of this Section be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such benefit, plan, or program, so long as such changes are similarly applicable to executive employees specifically, and no worse than all other employees generally; provided, however, that in the case of any discontinuation of any such benefit, plan or program, Company shall continue to provide such benefit or coverage through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual benefits or coverage at its expense.
2.4 Business and Entertainment Expenses. During his employment hereunder, subject to Company's standard policies and procedures with respect to expense reimbursement as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business-related purposes, including, but not limited to, dues and fees to industry and professional organizations and costs of entertainment and business development.
2.5 Indemnification. Company agrees to indemnify Executive against any and all liabilities arising out of Executive's employment duties to the extent such liabilities are not covered by any insurance maintained by Company or Executive, including any liabilities that are caused by or result from an act or omission constituting the negligence of Executive in the performance of such duties, but excluding liabilities that are caused by or result from Executive's own gross negligence or willful misconduct.
III.
Term and Termination of Employment
3.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date. Said term of employment shall be extended automatically for an additional successive three-year period as of each annual anniversary date of the Effective Date that occurs while this Agreement is in effect; provided, however, that if, at any time prior to any such anniversary date of the Effective Date, either party shall give written notice to the other that no such automatic extension shall occur, then Executive's employment shall terminate on the last day of the three-year period beginning on the annual anniversary date of the Effective Date that next occurs after such notice is given.
3.2 Company's Right to Terminate. Notwithstanding the provisions of Section 3.1, Company shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons:
(i) Upon Executive's death;
(ii) Upon Executive's becoming incapacitated by accident, sickness, or other circumstance that renders Executive mentally or physically incapable of performing the duties and services required of Executive hereunder on a full-time basis for a period of at least 180 consecutive calendar days;
(iii) For Cause;
(iv) For Executive's material breach of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice to Executive by Company of such breach; or
(v) For any other reason whatsoever, in the sole discretion of the Board of Directors.
3.3 Executive's Right to Terminate. Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons:
(i) A material breach by Company of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice of such breach by Executive to Company;
(ii) For Good Reason; or
(iii) For any other reason whatsoever, in the sole discretion of Executive.
3.4 Notice of Termination. If Company or Executive desires to terminate Executive's employment hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, Company or Executive shall do so by giving written notice of such termination to the other party and stating the effective date and reason for such termination; provided, however, that no such action shall alter or amend any other provisions hereof or rights arising hereunder, including, without limitation, the provisions of Articles V and VI hereof. For all purposes of this Agreement, Executive shall be considered to have terminated employment with Company when Executive incurs a "separation from service" with Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.
IV.
Effect of Termination of Employment
4.1 Termination By Expiration of Term. If Executive's employment hereunder shall terminate upon expiration of the term provided in Section 3.1 hereof, all compensation and all benefits to Executive hereunder shall terminate contemporaneously with termination of Executive's employment, except for such benefits as may be required by law.
4.2 Termination By Company. If Executive's employment hereunder shall be terminated by Company prior to expiration of the term provided in Section 3.1, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment; provided, however, that if such termination shall be for any reason other than those encompassed by Section 3.2(i), 3.2(ii), 3.2(iii), or 3.2(iv), Company shall (i) pay Executive a Termination Payment and (ii) provide Executive with Severance Benefits; provided further, however, that if termination is pursuant to Section 3.2(i) or 3.2(ii), the Company will provide Employee's spouse and dependent children with the benefits covered under Section 8.1(15)(iv); and provided further that all outstanding stock options granted by Company to Executive shall immediately become fully vested and immediately exercisable in full as provided under Section 8.1(15)(ii). The Termination Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the prime rate of interest published in The Wall Street Journal on the date of termination of Executive's employment (or if not published on that date, on the next following date when published) (the "Section 409A Interest Rate")) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the earlier of the date of Executive's death or the date that is six (6) months after the date of termination of Executive's employment (the "Section 409A Paymen t Date"). Executive hereby agrees to be bound by Company's determination of its "specified employees" (as such term is defined in Section 409A of the Code) in accordance with any of the methods permitted under the regulations issued under Section 409A of the Code.
4.3 Termination By Executive. If Executive's employment hereunder shall be terminated by Executive prior to expiration of the term provided in Section 3.1, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment; provided, however, that Company shall (i) pay Executive a Termination Payment and (ii) provide Executive with Severance Benefits. The Termination Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the Section 409A Interest Rate) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the Section 409A Payment Date.
4.4 Change in Control. If, within three (3) years following the occurrence of a Change in Control, Executive's employment with Company shall terminate for any reason, then, in lieu of any Termination Payment or Severance Benefits pursuant to Section 4.2 or 4.3, Company shall (1) pay Executive a Change in Control Payment and (2) provide Executive with Change in Control Benefits. The Change in Control Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the Section 409A Interest Rate) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the Section 409A Payment Date.
4.5 Parachute Payment Gross Up. Notwithstanding anything to the contrary in this Agreement, in the event that any payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive an additional payment (a "Gross-up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed on any Gross-up Payment, Executive retains an amount of the Gross-up Payment equal to the Excise Tax imposed upon the Payments. The Gross-up P ayment attributable to a particular Payment shall be made at the time such Payment is made; provided, however, that in no event shall the Gross-up Payment be made later than the end of Executive's taxable year next following Executive's taxable year in which Executive remits the related taxes. Executive shall notify Company in writing of any claim by the Internal Revenue Service which, if successful, would require Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially determined by Company) within ten days of the receipt of such claim. Company shall notify Executive in writing at least ten days prior to the due date of any response required with respect to such claim if it plans to contest the claim. If Company decides to contest such claim, Executive shall cooperate fully with Company in such action; provided, however, Company shall bear and pay directly or indirectly all costs and expenses (including additional interest and penalties) incurred in connection with s uch action and shall indemnify and hold 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 Company's action. If, as a result of Company's action with respect to a claim, Executive receives a refund of any amount paid by Company with respect to such claim, Executive shall promptly pay such refund to Company. If Company fails to timely notify Executive whether it will contest such claim, or if Company determines not to contest such claim, Company shall immediately pay to Executive the portion of such claim, if any, which it has not previously paid to Executive. All determinations required to be made under this Section 4.5, including, without limitation, 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 the independent public accounting firm used by Company immediately prior to the C hange in Control for purposes of preparing Company's audited financial statements. However, in the event such accounting firm is also serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder.
4.6 #9; No Duty to Mitigate Losses. Executive shall have no duty to find new employment following the termination of Executive's employment under circumstances that require Company to pay any amount to Executive pursuant to this Article IV. Any salary or remuneration received by Executive from a third party for the providing of personal services (whether by employment or by functioning as an independent contractor) following the termination of Executive's employment under circumstances pursuant to which this Article IV apply shall not reduce Company's obligation to make a payment to Executive (or the amount of any such payment) pursuant to the terms of this Article IV.
4.7 Liquidated Damages. In light of the difficulties in estimating the damages for an early termination of this Agreement, Company and Executive hereby agree that the payments, if any, to be received by Executive pursuant to this Article IV shall be received by Executive as liquidated damages and not as a penalty.
4.8 Other Compensation Programs. This Agreement governs the rights and obligations of Executive and Company with respect to Executive's annual base salary and certain perquisites of employment. Executive's rights and obligations both during the term of Executive's employment and thereafter with respect to stock options, restricted stock, incentive and deferred compensation, life insurance policies insuring the life of Executive, and other benefits under plans and programs maintained by Company shall be governed by the separate agreements, plans, programs, and other documents and instruments governing such matters, or as may be provided by law.
V.
Protection of Information
5.1 Disclosure to Executive. Company shall (i) disclose to Executive, or place Executive in a position to have access to or develop, trade secrets or confidential information of Company or its Affiliates, and/or (ii) entrust Executive with business opportunities of Company or its Affiliates, and/or (iii) place Executive in a position to develop business good will on behalf of Company or its Affiliates.
5.2 Disclosure to and Property of Company. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed, or acquired by Executive, individually or in conjunction with others, during Executive's employment by Company (whether during business hours or otherwise and whether on Company's premises or otherwise) that relate to Company's business, products, or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisitions prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Company and are and shall be the sole and exclusive property of Compan y. Moreover, all documents, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Company. Upon termination of Executive's employment by Company, for any reason, Executive promptly shall deliver the same, and all copies thereof, to Company.
5.3 No Unauthorized or Damaging Use or Disclosure. Executive will not, at any time during or after Executive's employment by Company, make any unauthorized disclosure of any confidential business information or trade secrets of Company or its Affiliates, or make any use thereof, except in the carrying out of Executive's employment responsibilities hereunder. Affiliates of the Company shall be third party beneficiaries of Executive's obligations under this Section. As a result of Executive's employment by Company, Executive may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Company and its Affiliates. Executive also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Company's confidential business information a nd trade secrets. Executive shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives (i) that are slanderous, libelous, or defamatory, or (ii) that disclose private or confidential information about Company, any of its Affiliates, or any of such entities' business affairs, officers, employees, agents, or representatives, or (iii) that constitute an intrusion into the seclusion or private lives of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives, or (iv) that give rise to unreasonable publicity about the private lives of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives, or (v) that place Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives in a false light before the public, or (vi) that constitute a misappropriation of the name or likeness of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined by the courts.
5.4 Ownership by Company. If, during Executive's employment by Company, Executive creates any work of authorship fixed in any tangible medium of expression, which is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Company's business, products, or services, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on Company's premises or otherwise), Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executive's employment; or, if the work is not prepared by Executive within the scope of Executive's employment but is specially ordered by Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translat ion, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Company shall be the author of the work. If such work is neither prepared by Executive within the scope of Executive's employment nor a work specially ordered that is deemed to be a work made for hire, then Executive hereby agrees to assign, and by these presents does assign, to Company all of Executive's worldwide right, title, and interest in and to such work and all rights of copyright therein.
5.5 Assistance by Executive. Both during the period of Executive's employment by Company and thereafter, Executive shall assist Company and its nominee, at any time, in the protection of Company's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries.
5.6 Remedies. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by Executive, and Company shall be entitled to enforce the provisions of this Article by terminating any and all payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to Company, including the recovery of damages from Executive and his agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.
VI.
Noncompetition Obligation
6.1 In General. As part of the consideration for the compensation and benefits to be paid to Executive hereunder; to protect the trade secrets and confidential information of Company and its Affiliates that have been and will in the future be disclosed or entrusted to Executive, the business good will of Company and its Affiliates that has been and will in the future be developed in Executive, or the business opportunities that have been and will in the future be disclosed or entrusted to Executive by Company and its Affiliates; and, as an additional incentive for Company to enter into this Agreement, Company and Executive agree to the noncompetition obligations hereunder. Executive shall not, directly or indirectly for Executive or for others, in any geographic area or market where Company or any of its Affiliates are conducting any business as of the date of the termination of the employment relationship or have during the previous twelve months conducted such busi ness:
(i) Engage in any business competitive with the business conducted by Company;
(ii) Provide comparable services to any other person, association, or entity who is primarily engaged in any business competitive with the business conducted by Company with respect to such competitive business; or
(iii) Induce any employee of Company or any of its Affiliates to terminate his or her employment with Company or such Affiliates, or hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Company.
The restrictions placed on Executive by this Section 6.1 shall apply during the period that Executive is employed by Company and for the two-year period thereafter if Executive's employment with Company is terminated for any reason other than (a) by Executive for a Good Reason or (b) by Company without Cause. Notwithstanding the foregoing, from and after the date upon which a Change in Control occurs, such restrictions shall cease to apply to Executive except for any period during which he is employed by Company.
6.2 Enforcement and Remedies. Executive understands that the restrictions set forth in Section 6.1 may limit Executive's ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Executive will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by Executive, and Company shall be entitled to enforce the provisions of this Article by terminating any payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to Company, including without limitation, the recovery of damages from Executive and E xecutive's agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.
6.3 Reformation. It is expressly understood and agreed that Company and Executive consider the restrictions contained in this Article to be reasonable and necessary to protect the proprietary information of Company. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such court so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.
VII.
Miscellaneous
7.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Company to: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Attention: Managing Director
cc: General Counsel
Core Laboratories, Inc.
6316 Windfern
Houston, Texas 77040
If to Executive to: Monty L. Davis
c/o 6316 Windfern
Houston, Texas 77040
or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.
7.2 Applicable Law. This Agreement is entered into under, and shall be governed for all purposes by, the laws of the state of Texas, except as may be preempted by federal law.
7.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
7.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.
7.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
7.6 Withholding of Taxes and Other Employee Deductions. Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city, and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company's employees generally.
7.7 Headings. The Article and Section headings herein have been inserted for purposes of convenience only and shall not be used for interpretive purposes.
7.8 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.
7.9 Assignment. This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or otherwise. Except as provided in the preceding sentence, this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit, or obligation of either party hereto shall be subject to voluntary or involuntary assignment, alienation, or transfer, whether by operation of law or otherwise, without the prior written consent of the other party.
7.10 Term. This Agreement has a term co-extensive with the term of employment provided in Section 3.1. Termination shall not affect any right or obligation of any party which is accrued or vested prior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles V and VI shall survive any termination of the employment relationship and/or of this Agreement.
7.11 Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties, and agreements between the parties with respect to employment of Executive by Company. Without limiting the scope of the preceding sentence, all prior understandings and agreements among the parties hereto relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement) are hereby null and void and of no further force and effect. Any modification of this Agreement will be effective only if it is in writing and signed by the party to be charged.
7.12 Legal Fees and Expenses. It is the intent of Company that Executive not be required to bear any legal fees or related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement (by litigation or otherwise) with respect to any termination of his employment on or after a Change in Control. Accordingly, if it should appear to Executive that Company has failed to comply with any of its obligations under this Agreement or in the event that Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Executive any benefit provided or intended to be provided to Executive hereunder, in each case with respect to his rights or obligations upon or following a termination of his employment on or after a Change in Control, then Company irrevocably authorizes the Executive fro m time to time to retain counsel of Executive's choice, at the expense of Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, including, without limitation, the initiation or defense of any litigation or other legal action, whether by or against Company or any director, officer, stockholder or other person affiliated with Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between Company and such counsel, Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection Company and Executive agree that a confidential relationship will exist between Executive and such counsel. Without regard to whether Executive prevails, in whole or in part, in connection with any of the foregoing, Company will pay and be solely financially responsible for any and all attorneys' fees and related expenses incurred by Executive in connection with any of the fo regoing, except to the extent that a final judgment no longer subject to appeal finds that a claim or defense asserted by Executive was frivolous. In such a case, the portion of such fees and expenses incurred by Executive attributable to such frivolous claim or defense shall become Executive's sole responsibility and any funds advanced by Company with respect to the same shall be promptly returned to Company by Executive without interest. Any reimbursement of attorneys' fees and related expenses required under this Section 7.12 shall be made by Company upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to Company (but in any event not later than the close of Executive's taxable year following the taxable year in which the fee or expense is incurred by Executive); provided, however, that, upon Executive's termination of employment with Company, in no event shall any additional reimbursement be made prior to the date that is six months after the date of Exec utive's termination of employment to the extent such payment delay is required under Section 409A(a)(2)(B)(i) of the Code. In no event shall any reimbursement be made to Executive for such fees and disbursements incurred after the later of (i) Executive's death or (ii) the date that is ten years after the date of Executive's termination of employment with Company.
VIII.
Definitions
8.1 Definitions. Where the following words and phrases appear in this Agreement, each shall have the respective meaning set forth below, unless the context clearly indicates to the contrary.
(1) "Affiliate" shall mean any entity that owns or controls, is owned or controlled by, or is under common ownership or control with, Core Laboratories N.V.
(2) "Board of Directors" shall mean the Board of Supervisory Directors of Core Laboratories N.V.
(3) "Cause" shall mean Executive has been convicted of any felony or a misdemeanor involving moral turpitude.
(4) "Change in Control" shall mean (i) a merger of Company with another entity, a consolidation involving Company, or the sale of all or substantially all of the assets of Company to another entity if, in any such case, (A) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board of Directors immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of Company or any affiliate of Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if Company has not engaged in a merger or consolidation, Company, or (B) if Company has engaged in a merger or consolidation, the resulting e ntity, or (iv) a change in the composition of the Board of Directors, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board of Directors" shall refer to the board of directors (or comparable governing body) of the resulting entity, and (3 ) "Incumbent Directors" shall mean directors who either (A) are directors of Company as of February 28, 2003, or (B) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or nomination, but Incumbent Director shall not include an individual whose election or nomination occurs as a result of either (A) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or (B) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors. For purposes of this Section 8.1(4), all references to "Company" shall refer solely to Core Laboratories N.V. except as expressly provided in clause (2) of the preceding sentence.
(5) "Change in Control Benefits" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group life insurance plans (or, as the case may be, those plans of the Affiliate at whose offices Executive spends a majority of his working time) shall be provided for Executive and those of Executive's dependents (including Executive's spouse) who were covered under such plans on the day prior to Executive's termination of employment with Company for thirty-six months from the date of such termination at no cost to Executive or Executive's dependents; provided, however, that (1) such coverage shall be subject to all of the terms and conditions of such plans, including, without limitation, the eligibility provisions, (2) such coverage shall terminate if and to the extent Executive or Executive's dependents become covered by the medical, dental, and life insurance plans of a subsequent employer (and any such coverage shall be promptly reported to Company by Executive), (3) if Executive (and/or Executive's spouse) would have been entitled to retiree medical, dental, and/or life insurance coverage under Company's plans (or such Affiliate's plans, as the case may be) had Executive voluntarily retired on the date of such termination, then such coverages shall be continued as provided under such plans, and (4) in the event that continued participation in any such Company plan (or such Affiliate's plan, as the case may be) is not permitted by the terms of such plan, Company shall use its best efforts to arrange, upon comparable terms, benefits substantially equivalent to those that were provided under such Company plan (or such Affiliate's plan, as the case may be). The medical and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or such Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(ii) All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and shall remain exercisable for a period of 12 months thereafter (three months thereafter in the case of Grandfathered Options) or for such greater period as may be provided in the plan or plans pursuant to which any such stock options were granted (but in no event shall any such stock option be exercisable after the earlier of the expiration of the original term of such stock option or the 10th anniversary of the original date of grant of such stock option). For purposes of the preceding sentence, the term "Grandfathered Options" means (1) each stock option granted by Company to Executive on or before February 28, 2003, with respect to which the purchase price per share under such stock option is less than the Fair Market Value (as such term is defined in the Core Laboratories N.V. 1995 Long-T erm Incentive Plan, as amended) per share as of February 28, 2003 and (2) each other stock option granted by Company to Executive on or before February 28, 2003, that qualifies as an incentive stock option (within the meaning of Section 422 of the Code) and which would cease to qualify as such an incentive stock option if the period during which such stock option could be exercised after termination of employment was extended from three months to 12 months as provided in the preceding sentence.
(iii) Company shall provide Executive with reasonable outplacement services at a cost not to exceed 100% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company; provided, however, that such outplacement services shall in no event be provided beyond the last day of the second taxable year of Executive following the taxable year of Executive in which Executive's termination of employment with Company occurred.
(iv) Notwithstanding the coverage therefor under any other provision hereof including clause (i) above, (provided that in no case shall this subsection require Company to provide duplicative benefits coverage under its own programs), Executive shall be provided a benefits package (for so long as Executive or Executive's spouse or dependent children shall live) including medical, hospital, dental, disability and life insurance plans and coverage (including supplemental insurance plans and coverage) for Executive and Executive's spouse and dependent children at least as favorable (including premium payments no higher than the lowest employee cost of such coverage) to Executive (and Executive's spouse and/or dependent children) as those provided immediately prior to termination unless, with respect to any particular plan or coverage, the continuation of such existing plan or coverage would have material adverse financial or regulatory consequences for the Company, in which case the plan or coverage will be provided through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual coverage at its expense. If the receipt of any benefit or payment under this clause (iv) ("Benefit") is taxable to Executive, then Company shall pay to Executive, within 60 days after the end of each taxable year of Executive, an additional amount in cash ("Additional Payment") equal to all taxes (including any interest or penalties imposed with respect to such taxes) Executive incurs with respect to such Benefit for such taxable year and any Additional Payment received by Executive during such taxable year. The medical, hospital and dental coverage described in the first sentence of this clause (iv) shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage u nder Company's plans (or an Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(6) "Change in Control Payment" shall mean a lump sum payment in an amount equal to three times the sum of (i) Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company and (ii) the greater of (x) the highest annual bonus earned by Executive during any of the last three fiscal years of Company ending prior to the Change in Control, and (y) 45% of the maximum annual incentive bonus amount pursuant to Section 2.2 that Executive could have earned for the year during which Executive's employment with Company terminates.
(7) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(8) "Committee" shall mean the Compensation Committee of the Board of Directors.
(9) "Company" shall mean Core Laboratories N.V. and its Affiliates.
(10) "Effective Date" shall mean August 1, 2007.
(11) "Executive" shall mean Monty L. Davis.
(12) "Good Reason" shall mean termination by Executive of Executive's employment with Company within sixty days of and in connection with or due to (i) a significant change in the nature, status, or scope of Executive's duties, responsibilities, or authorities, (ii) a permanent change and relocation of Executive's principal place of employment with Company, which is more than fifty miles away from the prior location, (iii) a material breach by Company of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice of such breach by Executive to Company, (iv) a material diminution in Executive's participation in bonus, stock option, incentive award, and other compensation plans provided by Company for executives with comparable duties, (v) a material diminution in employee benefits (including but not limited to medical, dental, life insurance, and long-term disability plans) and perquisites applicable to Executive from the employee benefits and perquisites provided by Company to executives with comparable duties, or (vi) in Executive's sole judgment, the scope of Executive's position or continued employment within Company being no longer appropriate.
(13) "Grandfathered Severance Amount" shall mean $754,000, which amount is equal to the "Termination Payment" that Executive would have received pursuant to the terms of the Prior Employment Agreement if Executive had voluntarily terminated his employment with the Company (for any reason whatsoever or for no reason) on December 31, 2004.
(14) "Prior Employment Agreement" shall mean that certain Employment Agreement between Core Laboratories N.V. and Executive that was restated as of December 31, 2001, as amended.
(15) "Severance Benefits" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group life insurance plans (or, as the case may be, those of the Affiliate at whose offices Executive spends a majority of his working time) shall be provided for Executive and those of Executive's dependents (including Executive's spouse) who were covered under such plans on the day prior to Executive's termination of employment with Company for thirty-six months from the date of such termination at no cost to Executive or Executive's dependents; provided, however, that (1) such coverage shall be subject to all of the terms and conditions of such plans, including, without limitation, eligibility provisions, (2) such coverage shall terminate if and to the extent Executive or Executive's dependents become covered by the medical, dental, and life insurance plans of a subsequent employer (and any such coverage shall be promptly reported to Company by Executive), (3) if Executive (and/or Executive's spouse) would have been enti tled to retiree medical, dental, and/or life insurance coverage under Company's plans (or such Affiliate's plans, as the case may be) had Executive voluntarily retired on the date of such termination, then such coverages shall be continued as provided under such plans), and (4) in the event that continued participation in any such Company plan is not permitted by the terms of such plan, Company shall use its best efforts to arrange, upon comparable terms, benefits substantially equivalent to those that were provided under such Company plan (or such Affiliate's plan, as the case may be). The medical and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or such Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(ii) All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and for a period of three months thereafter or for such greater period as may be provided in the plan or plans pursuant to which such stock options were granted (but in no event shall any such stock option be exercisable after the earlier of the expiration of the original term of such stock option or the 10th anniversary of the original date of grant of such stock option).
(iii) Company shall provide Executive with reasonable outplacement services at a cost not to exceed 100% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company; provided, however, that such outplacement services shall in no event be provided beyond the last day of the second taxable year of Executive following the taxable year of Executive in which Executive's termination of employment with Company occurred.
(iv) Notwithstanding the coverage therefor under any other provision hereof including clause (i) above, (provided that in no case shall this subsection require Company to provide duplicative benefits coverage under its own programs), Executive shall be provided a benefits package (for so long as Executive or Executive's spouse or dependent children shall live) including medical, hospital, dental, disability and life insurance plans and coverage (including supplemental insurance plans and coverage) for Executive and Executive's spouse and dependent children at least as favorable (including premium payments no higher than the lowest employee cost of such coverage) to Executive (and Executive's spouse and/or dependent children) as those provided immediately prior to termination unless, with respect to any particular plan or coverage, the continuation of such existing plan or coverage would have material adverse financial or regulatory consequences for the Company, in which case the plan or coverage will be provided through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual coverage at its expense. The medical, hospital and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or an Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(16) "Termination Payment" shall mean a lump sum payment in an amount equal to the sum of (i) 200% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company and (ii) two times 45% of the maximum annual incentive bonus amount pursuant to Section 2.2 that Executive could have earned for the year during which Executive's employment with Company terminates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 5th day of March, 2008, to be effective as of the Effective Date.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
By: /s/ JAN WILLEM SODDERLAND
Jan Willem Sodderland
Managing Director of
Core Laboratories International B.V.
EXECUTIVE
/s/ Monty L. Davis
Monty L. Davis
Houston 3332780v1
Employment Agreement
(Restated as of December 31, 2007)
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made by and between CORE LABORATORIES N.V. and John D. Denson ("Executive").
W
I T N E S S E T H:WHEREAS, Executive is currently an employee of Core Laboratories N.V. and/or one or more of its Affiliates ("Company"); and
WHEREAS, the Company desires to continue to employ Executive on the terms and conditions, and for the consideration, hereinafter set forth, and Executive is desirous of continuing to be employed by Company on such terms and conditions, and for such consideration;
NOW, THEREFORE, for and in consideration of the amounts and benefits to be paid and provided to Executive under this Agreement and the mutual promises, covenants, and undertakings contained herein, Core Laboratories N.V. and Executive, each intending to be legally bound, hereby agree as follows:
I.
Employment and Duties
1.1 Employment; Effective Date. Company agrees to employ Executive, and Executive agrees to be employed by Company, beginning as of the Effective Date and continuing for the period of time set forth in Article III of this Agreement, subject to the terms and conditions of this Agreement.
1.2 Position. From and after the Effective Date, Company shall employ Executive in the position of General Counsel, Vice President and Secretary of Company, or in such other comparable executive position as Company and Executive may mutually agree.
1.3 Duties and Services. Executive agrees to serve in the position referred to in Section 1.2 and to perform diligently and to the best of Executive's abilities the duties and services appertaining to such office, as well as such additional duties and services appropriate to such office upon which the parties mutually may agree from time to time. Executive's employment shall also be subject to the policies maintained and established by Company, as the same may be amended from time to time.
1.4 Other Interests. Executive agrees, during the period of Executive's employment by Company, to devote Executive's primary business time, energy, and best efforts to the business and affairs of Company and its Affiliates and not to engage, directly or indirectly, in any other business or businesses, whether or not similar to that of Company, except with the consent of the Board of Directors. The foregoing notwithstanding, the parties recognize and agree that Executive may, without consent of the Board of Directors, engage in charitable, civic, and other business activities that do not conflict with the business and affairs of Company and in passive personal investments, so long as such activities do not interfere with Executive's performance of Executive's duties hereunder.
1.5 Duty of Loyalty. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity, and allegiance to act at all times in the best interests of Company. In keeping with these duties, Executive shall make full disclosure to Company of all business opportunities pertaining to Company's business and shall not appropriate for Executive's own benefit business opportunities concerning the subject matter of the fiduciary relationship.
II.
Compensation and Benefits
2.1 #9; Base Salary. During the period of this Agreement, Executive shall receive a minimum annual base salary of $312,000. Executive's annual base salary shall be reviewed by the Board of Directors (or a committee thereof) on an annual basis, and, in the sole discretion of the Board of Directors (or such committee), such annual base salary may be increased, but not decreased no less than once every calendar year. Executive's annual base salary shall be paid in equal installments in accordance with the Company's standard policy regarding payment of compensation to executives but no less frequently than monthly.
2.2 Bonuses. Executive shall be eligible to receive an annual bonus of up to 75% of Executive's annual base salary with the amount of such bonus to be determined by the Committee based upon criteria established from time to time by the Committee.
2.3 Employee Benefits. Executive and, to the extent applicable, Executive's spouse, dependents, and beneficiaries shall be allowed to participate in all benefits, plans, and programs, including improvements or modifications of the same, which are now, or may hereafter be, available to other executive employees of Company (or such Affiliate at whose offices Executive spends a majority of his working time, as the case may be). Such benefits, plans, and programs shall include, without limitation, any deferred compensation plan, matching share program, performance share program, profit sharing plan, thrift plan, health insurance or health care plan, life insurance (including any available supplemental insurance), disability insurance (including any available supplemental insurance), pension plan, supplemental retirement plan, stock option plan, vacation and sick leave plan, and the like which may be maintained by Company (or such Affiliate, as the case may be) for Execut ive specifically or for employees of Executive's seniority and position generally. Company shall not, however, by reason of this Section be obligated to institute, maintain, or refrain from changing, amending, or discontinuing, any such benefit, plan, or program, so long as such changes are similarly applicable to executive employees specifically, and no worse than all other employees generally; provided, however, that in the case of any discontinuation of any such benefit, plan or program, Company shall continue to provide such benefit or coverage through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual benefits or coverage at its expense.
2.4 Business and Entertainment Expenses. During his employment hereunder, subject to Company's standard policies and procedures with respect to expense reimbursement as applied to its executive employees generally, Company shall reimburse Executive for, or pay on behalf of Executive, reasonable and appropriate expenses incurred by Executive for business-related purposes, including, but not limited to, dues and fees to industry and professional organizations and costs of entertainment and business development.
2.5 Indemnification. Company agrees to indemnify Executive against any and all liabilities arising out of Executive's employment duties to the extent such liabilities are not covered by any insurance maintained by Company or Executive, including any liabilities that are caused by or result from an act or omission constituting the negligence of Executive in the performance of such duties, but excluding liabilities that are caused by or result from Executive's own gross negligence or willful misconduct.
III.
Term and Termination of Employment
3.1 Term. Unless sooner terminated pursuant to other provisions hereof, Company agrees to employ Executive for the period beginning on the Effective Date and ending on the third anniversary of the Effective Date. Said term of employment shall be extended automatically for an additional successive three-year period as of each annual anniversary date of the Effective Date that occurs while this Agreement is in effect; provided, however, that if, at any time prior to any such anniversary date of the Effective Date, either party shall give written notice to the other that no such automatic extension shall occur, then Executive's employment shall terminate on the last day of the three-year period beginning on the annual anniversary date of the Effective Date that next occurs after such notice is given.
3.2 Company's Right to Terminate. Notwithstanding the provisions of Section 3.1, Company shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons:
(i) Upon Executive's death;
(ii) Upon Executive's becoming incapacitated by accident, sickness, or other circumstance that renders Executive mentally or physically incapable of performing the duties and services required of Executive hereunder on a full-time basis for a period of at least 180 consecutive calendar days;
(iii) For Cause;
(iv) For Executive's material breach of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice to Executive by Company of such breach; or
(v) For any other reason whatsoever, in the sole discretion of the Board of Directors.
3.3 Executive's Right to Terminate. Notwithstanding the provisions of Section 3.1, Executive shall have the right to terminate Executive's employment under this Agreement at any time for any of the following reasons:
(i) A material breach by Company of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice of such breach by Executive to Company;
(ii) For Good Reason; or
(iii) For any other reason whatsoever, in the sole discretion of Executive.
3.4 Notice of Termination. If Company or Executive desires to terminate Executive's employment hereunder at any time prior to expiration of the term of employment as provided in Section 3.1, Company or Executive shall do so by giving written notice of such termination to the other party and stating the effective date and reason for such termination; provided, however, that no such action shall alter or amend any other provisions hereof or rights arising hereunder, including, without limitation, the provisions of Articles V and VI hereof. For all purposes of this Agreement, Executive shall be considered to have terminated employment with Company when Executive incurs a "separation from service" with Company within the meaning of Section 409A(a)(2)(A)(i) of the Code and applicable administrative guidance issued thereunder.
IV.
Effect of Termination of Employment
4.1 Termination By Expiration of Term. If Executive's employment hereunder shall terminate upon expiration of the term provided in Section 3.1 hereof, all compensation and all benefits to Executive hereunder shall terminate contemporaneously with termination of Executive's employment, except for such benefits as may be required by law.
4.2 Termination By Company. If Executive's employment hereunder shall be terminated by Company prior to expiration of the term provided in Section 3.1, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment; provided, however, that if such termination shall be for any reason other than those encompassed by Section 3.2(i), 3.2(ii), 3.2(iii), or 3.2(iv), Company shall (i) pay Executive a Termination Payment and (ii) provide Executive with Severance Benefits; provided further, however, that if termination is pursuant to Section 3.2(i) or 3.2(ii), the Company will provide Employee's spouse and dependent children with the benefits covered under Section 8.1(15)(iv); and provided further that all outstanding stock options granted by Company to Executive shall immediately become fully vested and immediately exercisable in full as provided under Section 8.1(15)(ii). The Termination Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the prime rate of interest published in The Wall Street Journal on the date of termination of Executive's employment (or if not published on that date, on the next following date when published) (the "Section 409A Interest Rate")) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the earlier of the date of Executive's death or the date that is six (6) months after the date of termination of Executive's employment (the "Section 409A Paymen t Date"). Executive hereby agrees to be bound by Company's determination of its "specified employees" (as such term is defined in Section 409A of the Code) in accordance with any of the methods permitted under the regulations issued under Section 409A of the Code.
4.3 Termination By Executive. If Executive's employment hereunder shall be terminated by Executive prior to expiration of the term provided in Section 3.1, regardless of the reason therefor, all compensation and benefits to Executive hereunder shall terminate contemporaneously with the termination of such employment; provided, however, that Company shall (i) pay Executive a Termination Payment and (ii) provide Executive with Severance Benefits. The Termination Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the Section 409A Interest Rate) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the Section 409A Payment Date.
4.4 Change in Control. If, within three (3) years following the occurrence of a Change in Control, Executive's employment with Company shall terminate for any reason, then, in lieu of any Termination Payment or Severance Benefits pursuant to Section 4.2 or 4.3, Company shall (1) pay Executive a Change in Control Payment and (2) provide Executive with Change in Control Benefits. The Change in Control Payment described in the preceding sentence shall be paid by Company to Executive within thirty days after the last day of Executive's employment with Company; provided, however, that, if required to satisfy the provisions of Section 409A(a)(2)(B)(i) of the Code, the portion of the Termination Payment that is in excess of the Grandfathered Severance Amount (with interest on such portion from the date of Executive's termination of employment to the actual date of payment at the Section 409A Interest Rate) shall be paid by Company to Executive not earlier than but as soon as practicable on or in any event within five days after the Section 409A Payment Date.
4.5 Parachute Payment Gross Up. Notwithstanding anything to the contrary in this Agreement, in the event that any payment or distribution by the Company to or for the benefit of Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest or penalties, are hereinafter collectively referred to as the "Excise Tax"), Company shall pay to Executive an additional payment (a "Gross-up Payment") in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed on any Gross-up Payment, Executive retains an amount of the Gross-up Payment equal to the Excise Tax imposed upon the Payments. The Gross-up P ayment attributable to a particular Payment shall be made at the time such Payment is made; provided, however, that in no event shall the Gross-up Payment be made later than the end of Executive's taxable year next following Executive's taxable year in which Executive remits the related taxes. Executive shall notify Company in writing of any claim by the Internal Revenue Service which, if successful, would require Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any, initially determined by Company) within ten days of the receipt of such claim. Company shall notify Executive in writing at least ten days prior to the due date of any response required with respect to such claim if it plans to contest the claim. If Company decides to contest such claim, Executive shall cooperate fully with Company in such action; provided, however, Company shall bear and pay directly or indirectly all costs and expenses (including additional interest and penalties) incurred in connection with s uch action and shall indemnify and hold 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 Company's action. If, as a result of Company's action with respect to a claim, Executive receives a refund of any amount paid by Company with respect to such claim, Executive shall promptly pay such refund to Company. If Company fails to timely notify Executive whether it will contest such claim, or if Company determines not to contest such claim, Company shall immediately pay to Executive the portion of such claim, if any, which it has not previously paid to Executive. All determinations required to be made under this Section 4.5, including, without limitation, 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 the independent public accounting firm used by Company immediately prior to the C hange in Control for purposes of preparing Company's audited financial statements. However, in the event such accounting firm is also serving as an accountant or auditor for the individual, entity or group effecting the Change in Control, Executive may appoint another nationally recognized accounting firm to make the determinations required hereunder.
4.6 #9; No Duty to Mitigate Losses. Executive shall have no duty to find new employment following the termination of Executive's employment under circumstances that require Company to pay any amount to Executive pursuant to this Article IV. Any salary or remuneration received by Executive from a third party for the providing of personal services (whether by employment or by functioning as an independent contractor) following the termination of Executive's employment under circumstances pursuant to which this Article IV apply shall not reduce Company's obligation to make a payment to Executive (or the amount of any such payment) pursuant to the terms of this Article IV.
4.7 Liquidated Damages. In light of the difficulties in estimating the damages for an early termination of this Agreement, Company and Executive hereby agree that the payments, if any, to be received by Executive pursuant to this Article IV shall be received by Executive as liquidated damages and not as a penalty.
4.8 Other Compensation Programs. This Agreement governs the rights and obligations of Executive and Company with respect to Executive's annual base salary and certain perquisites of employment. Executive's rights and obligations both during the term of Executive's employment and thereafter with respect to stock options, restricted stock, incentive and deferred compensation, life insurance policies insuring the life of Executive, and other benefits under plans and programs maintained by Company shall be governed by the separate agreements, plans, programs, and other documents and instruments governing such matters, or as may be provided by law.
V.
Protection of Information
5.1 Disclosure to Executive. Company shall (i) disclose to Executive, or place Executive in a position to have access to or develop, trade secrets or confidential information of Company or its Affiliates, and/or (ii) entrust Executive with business opportunities of Company or its Affiliates, and/or (iii) place Executive in a position to develop business good will on behalf of Company or its Affiliates.
5.2 Disclosure to and Property of Company. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed, or acquired by Executive, individually or in conjunction with others, during Executive's employment by Company (whether during business hours or otherwise and whether on Company's premises or otherwise) that relate to Company's business, products, or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisitions prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks) shall be disclosed to Company and are and shall be the sole and exclusive property of Compan y. Moreover, all documents, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, E-mail, voice mail, electronic databases, maps, and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries, and inventions are and shall be the sole and exclusive property of Company. Upon termination of Executive's employment by Company, for any reason, Executive promptly shall deliver the same, and all copies thereof, to Company.
5.3 No Unauthorized or Damaging Use or Disclosure. Executive will not, at any time during or after Executive's employment by Company, make any unauthorized disclosure of any confidential business information or trade secrets of Company or its Affiliates, or make any use thereof, except in the carrying out of Executive's employment responsibilities hereunder. Affiliates of the Company shall be third party beneficiaries of Executive's obligations under this Section. As a result of Executive's employment by Company, Executive may also from time to time have access to, or knowledge of, confidential business information or trade secrets of third parties, such as customers, suppliers, partners, joint venturers, and the like, of Company and its Affiliates. Executive also agrees to preserve and protect the confidentiality of such third party confidential information and trade secrets to the same extent, and on the same basis, as Company's confidential business information a nd trade secrets. Executive shall refrain, both during the employment relationship and after the employment relationship terminates, from publishing any oral or written statements about Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives (i) that are slanderous, libelous, or defamatory, or (ii) that disclose private or confidential information about Company, any of its Affiliates, or any of such entities' business affairs, officers, employees, agents, or representatives, or (iii) that constitute an intrusion into the seclusion or private lives of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives, or (iv) that give rise to unreasonable publicity about the private lives of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives, or (v) that place Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives in a false light before the public, or (vi) that constitute a misappropriation of the name or likeness of Company, any of its Affiliates, or any of such entities' officers, employees, agents, or representatives. A violation or threatened violation of this prohibition may be enjoined by the courts.
5.4 Ownership by Company. If, during Executive's employment by Company, Executive creates any work of authorship fixed in any tangible medium of expression, which is the subject matter of copyright (such as videotapes, written presentations, or acquisitions, computer programs, E-mail, voice mail, electronic databases, drawings, maps, architectural renditions, models, manuals, brochures, or the like) relating to Company's business, products, or services, whether such work is created solely by Executive or jointly with others (whether during business hours or otherwise and whether on Company's premises or otherwise), Company shall be deemed the author of such work if the work is prepared by Executive in the scope of Executive's employment; or, if the work is not prepared by Executive within the scope of Executive's employment but is specially ordered by Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translat ion, as a supplementary work, as a compilation, or as an instructional text, then the work shall be considered to be work made for hire and Company shall be the author of the work. If such work is neither prepared by Executive within the scope of Executive's employment nor a work specially ordered that is deemed to be a work made for hire, then Executive hereby agrees to assign, and by these presents does assign, to Company all of Executive's worldwide right, title, and interest in and to such work and all rights of copyright therein.
5.5 Assistance by Executive. Both during the period of Executive's employment by Company and thereafter, Executive shall assist Company and its nominee, at any time, in the protection of Company's worldwide right, title, and interest in and to information, ideas, concepts, improvements, discoveries, and inventions, and its copyrighted works, including without limitation, the execution of all formal assignment documents requested by Company or its nominee and the execution of all lawful oaths and applications for patents and registration of copyright in the United States and foreign countries.
5.6 Remedies. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by Executive, and Company shall be entitled to enforce the provisions of this Article by terminating any and all payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to Company, including the recovery of damages from Executive and his agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.
VI.
Noncompetition Obligation
6.1 In General. As part of the consideration for the compensation and benefits to be paid to Executive hereunder; to protect the trade secrets and confidential information of Company and its Affiliates that have been and will in the future be disclosed or entrusted to Executive, the business good will of Company and its Affiliates that has been and will in the future be developed in Executive, or the business opportunities that have been and will in the future be disclosed or entrusted to Executive by Company and its Affiliates; and, as an additional incentive for Company to enter into this Agreement, Company and Executive agree to the noncompetition obligations hereunder. Executive shall not, directly or indirectly for Executive or for others, in any geographic area or market where Company or any of its Affiliates are conducting any business as of the date of the termination of the employment relationship or have during the previous twelve months conducted such busi ness:
(i) Engage in any business competitive with the business conducted by Company;
(ii) Provide comparable services to any other person, association, or entity who is primarily engaged in any business competitive with the business conducted by Company with respect to such competitive business; or
(iii) Induce any employee of Company or any of its Affiliates to terminate his or her employment with Company or such Affiliates, or hire or assist in the hiring of any such employee by any person, association, or entity not affiliated with Company.
The restrictions placed on Executive by this Section 6.1 shall apply during the period that Executive is employed by Company and for the two-year period thereafter if Executive's employment with Company is terminated for any reason other than (a) by Executive for a Good Reason or (b) by Company without Cause. Notwithstanding the foregoing, from and after the date upon which a Change in Control occurs, such restrictions shall cease to apply to Executive except for any period during which he is employed by Company.
6.2 Enforcement and Remedies. Executive understands that the restrictions set forth in Section 6.1 may limit Executive's ability to engage in certain businesses anywhere in the world during the period provided for above, but acknowledges that Executive will receive sufficiently high remuneration and other benefits under this Agreement to justify such restriction. Executive acknowledges that money damages would not be sufficient remedy for any breach of this Article by Executive, and Company shall be entitled to enforce the provisions of this Article by terminating any payments then owing to Executive under this Agreement and/or to specific performance and injunctive relief as remedies for such breach or any threatened breach. Such remedies shall not be deemed the exclusive remedies for a breach of this Article, but shall be in addition to all remedies available at law or in equity to Company, including without limitation, the recovery of damages from Executive and E xecutive's agents involved in such breach and remedies available to Company pursuant to other agreements with Executive.
6.3 Reformation. It is expressly understood and agreed that Company and Executive consider the restrictions contained in this Article to be reasonable and necessary to protect the proprietary information of Company. Nevertheless, if any of the aforesaid restrictions are found by a court having jurisdiction to be unreasonable, or overly broad as to geographic area or time, or otherwise unenforceable, the parties intend for the restrictions therein set forth to be modified by such court so as to be reasonable and enforceable and, as so modified by the court, to be fully enforced.
VII.
Miscellaneous
7.1 Notices. For purposes of this Agreement, notices and all other communications provided for herein shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:
If to Company to: Core Laboratories N.V.
Herengracht 424
1017 BZ Amsterdam
The Netherlands
Attention: Managing Director
cc: General Counsel
Core Laboratories, Inc.
6316 Windfern
Houston, Texas 77040
If to Executive to: John D. Denson
c/o 6316 Windfern
Houston, Texas 77040
or to such other address as either party may furnish to the other in writing in accordance herewith, except that notices or changes of address shall be effective only upon receipt.
7.2 Applicable Law. This Agreement is entered into under, and shall be governed for all purposes by, the laws of the state of Texas, except as may be preempted by federal law.
7.3 No Waiver. No failure by either party hereto at any time to give notice of any breach by the other party of, or to require compliance with, any condition or provision of this Agreement shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.
7.4 Severability. If a court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then the invalidity or unenforceability of that provision shall not affect the validity or enforceability of any other provision of this Agreement, and all other provisions shall remain in full force and effect.
7.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement.
7.6 Withholding of Taxes and Other Employee Deductions. Company may withhold from any benefits and payments made pursuant to this Agreement all federal, state, city, and other taxes as may be required pursuant to any law or governmental regulation or ruling and all other normal employee deductions made with respect to Company's employees generally.
7.7 Headings. The Article and Section headings herein have been inserted for purposes of convenience only and shall not be used for interpretive purposes.
7.8 Gender and Plurals. Wherever the context so requires, the masculine gender includes the feminine or neuter, and the singular number includes the plural and conversely.
7.9 Assignment. This Agreement shall be binding upon and inure to the benefit of Company and any successor of Company, by merger or otherwise. Except as provided in the preceding sentence, this Agreement, and the rights and obligations of the parties hereunder, are personal and neither this Agreement, nor any right, benefit, or obligation of either party hereto shall be subject to voluntary or involuntary assignment, alienation, or transfer, whether by operation of law or otherwise, without the prior written consent of the other party.
7.10 Term. This Agreement has a term co-extensive with the term of employment provided in Section 3.1. Termination shall not affect any right or obligation of any party which is accrued or vested prior to such termination. Without limiting the scope of the preceding sentence, the provisions of Articles V and VI shall survive any termination of the employment relationship and/or of this Agreement.
7.11 Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to the subject matter hereof, and contains all the covenants, promises, representations, warranties, and agreements between the parties with respect to employment of Executive by Company. Without limiting the scope of the preceding sentence, all prior understandings and agreements among the parties hereto relating to the subject matter hereof (including, without limitation, the Prior Employment Agreement) are hereby null and void and of no further force and effect. Any modification of this Agreement will be effective only if it is in writing and signed by the party to be charged.
7.12 Legal Fees and Expenses. It is the intent of Company that Executive not be required to bear any legal fees or related expenses associated with the interpretation, enforcement or defense of Executive's rights under this Agreement (by litigation or otherwise) with respect to any termination of his employment on or after a Change in Control. Accordingly, if it should appear to Executive that Company has failed to comply with any of its obligations under this Agreement or in the event that Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Executive any benefit provided or intended to be provided to Executive hereunder, in each case with respect to his rights or obligations upon or following a termination of his employment on or after a Change in Control, then Company irrevocably authorizes the Executive fro m time to time to retain counsel of Executive's choice, at the expense of Company, to advise and represent Executive in connection with any such interpretation, enforcement or defense, including, without limitation, the initiation or defense of any litigation or other legal action, whether by or against Company or any director, officer, stockholder or other person affiliated with Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship between Company and such counsel, Company irrevocably consents to Executive entering into an attorney-client relationship with such counsel, and in that connection Company and Executive agree that a confidential relationship will exist between Executive and such counsel. Without regard to whether Executive prevails, in whole or in part, in connection with any of the foregoing, Company will pay and be solely financially responsible for any and all attorneys' fees and related expenses incurred by Executive in connection with any of the fo regoing, except to the extent that a final judgment no longer subject to appeal finds that a claim or defense asserted by Executive was frivolous. In such a case, the portion of such fees and expenses incurred by Executive attributable to such frivolous claim or defense shall become Executive's sole responsibility and any funds advanced by Company with respect to the same shall be promptly returned to Company by Executive without interest. Any reimbursement of attorneys' fees and related expenses required under this Section 7.12 shall be made by Company upon or as soon as practicable following receipt of supporting documentation reasonably satisfactory to Company (but in any event not later than the close of Executive's taxable year following the taxable year in which the fee or expense is incurred by Executive); provided, however, that, upon Executive's termination of employment with Company, in no event shall any additional reimbursement be made prior to the date that is six months after the date of Exec utive's termination of employment to the extent such payment delay is required under Section 409A(a)(2)(B)(i) of the Code. In no event shall any reimbursement be made to Executive for such fees and disbursements incurred after the later of (i) Executive's death or (ii) the date that is ten years after the date of Executive's termination of employment with Company.
VIII.
Definitions
8.1 Definitions. Where the following words and phrases appear in this Agreement, each shall have the respective meaning set forth below, unless the context clearly indicates to the contrary.
(1) "Affiliate" shall mean any entity that owns or controls, is owned or controlled by, or is under common ownership or control with, Core Laboratories N.V.
(2) "Board of Directors" shall mean the Board of Supervisory Directors of Core Laboratories N.V.
(3) "Cause" shall mean Executive has been convicted of any felony or a misdemeanor involving moral turpitude.
(4) "Change in Control" shall mean (i) a merger of Company with another entity, a consolidation involving Company, or the sale of all or substantially all of the assets of Company to another entity if, in any such case, (A) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of the votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board of Directors immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of Company, (iii) when any person or entity, including a "group" as contemplated by Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of Company or any affiliate of Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if Company has not engaged in a merger or consolidation, Company, or (B) if Company has engaged in a merger or consolidation, the resulting e ntity, or (iv) a change in the composition of the Board of Directors, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board of Directors" shall refer to the board of directors (or comparable governing body) of the resulting entity, and (3 ) "Incumbent Directors" shall mean directors who either (A) are directors of Company as of February 28, 2003, or (B) are elected, or nominated for election, to the Board of Directors with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or nomination, but Incumbent Director shall not include an individual whose election or nomination occurs as a result of either (A) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or (B) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors. For purposes of this Section 8.1(4), all references to "Company" shall refer solely to Core Laboratories N.V. except as expressly provided in clause (2) of the preceding sentence.
(5) "Change in Control Benefits" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group life insurance plans (or, as the case may be, those plans of the Affiliate at whose offices Executive spends a majority of his working time) shall be provided for Executive and those of Executive's dependents (including Executive's spouse) who were covered under such plans on the day prior to Executive's termination of employment with Company for thirty-six months from the date of such termination at no cost to Executive or Executive's dependents; provided, however, that (1) such coverage shall be subject to all of the terms and conditions of such plans, including, without limitation, the eligibility provisions, (2) such coverage shall terminate if and to the extent Executive or Executive's dependents become covered by the medical, dental, and life insurance plans of a subsequent employer (and any such coverage shall be promptly reported to Company by Executive), (3) if Executive (and/or Executive's spouse) would have been entitled to retiree medical, dental, and/or life insurance coverage under Company's plans (or such Affiliate's plans, as the case may be) had Executive voluntarily retired on the date of such termination, then such coverages shall be continued as provided under such plans, and (4) in the event that continued participation in any such Company plan (or such Affiliate's plan, as the case may be) is not permitted by the terms of such plan, Company shall use its best efforts to arrange, upon comparable terms, benefits substantially equivalent to those that were provided under such Company plan (or such Affiliate's plan, as the case may be). The medical and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or such Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(ii) All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and shall remain exercisable for a period of 12 months thereafter (three months thereafter in the case of Grandfathered Options) or for such greater period as may be provided in the plan or plans pursuant to which any such stock options were granted (but in no event shall any such stock option be exercisable after the earlier of the expiration of the original term of such stock option or the 10th anniversary of the original date of grant of such stock option). For purposes of the preceding sentence, the term "Grandfathered Options" means (1) each stock option granted by Company to Executive on or before February 28, 2003, with respect to which the purchase price per share under such stock option is less than the Fair Market Value (as such term is defined in the Core Laboratories N.V. 1995 Long-T erm Incentive Plan, as amended) per share as of February 28, 2003 and (2) each other stock option granted by Company to Executive on or before February 28, 2003, that qualifies as an incentive stock option (within the meaning of Section 422 of the Code) and which would cease to qualify as such an incentive stock option if the period during which such stock option could be exercised after termination of employment was extended from three months to 12 months as provided in the preceding sentence.
(iii) Company shall provide Executive with reasonable outplacement services at a cost not to exceed 100% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company; provided, however, that such outplacement services shall in no event be provided beyond the last day of the second taxable year of Executive following the taxable year of Executive in which Executive's termination of employment with Company occurred.
(iv) Notwithstanding the coverage therefor under any other provision hereof including clause (i) above, (provided that in no case shall this subsection require Company to provide duplicative benefits coverage under its own programs), Executive shall be provided a benefits package (for so long as Executive or Executive's spouse or dependent children shall live) including medical, hospital, dental, disability and life insurance plans and coverage (including supplemental insurance plans and coverage) for Executive and Executive's spouse and dependent children at least as favorable (including premium payments no higher than the lowest employee cost of such coverage) to Executive (and Executive's spouse and/or dependent children) as those provided immediately prior to termination unless, with respect to any particular plan or coverage, the continuation of such existing plan or coverage would have material adverse financial or regulatory consequences for the Company, in which case the plan or coverage will be provided through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual coverage at its expense. If the receipt of any benefit or payment under this clause (iv) ("Benefit") is taxable to Executive, then Company shall pay to Executive, within 60 days after the end of each taxable year of Executive, an additional amount in cash ("Additional Payment") equal to all taxes (including any interest or penalties imposed with respect to such taxes) Executive incurs with respect to such Benefit for such taxable year and any Additional Payment received by Executive during such taxable year. The medical, hospital and dental coverage described in the first sentence of this clause (iv) shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage u nder Company's plans (or an Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(6) "Change in Control Payment" shall mean a lump sum payment in an amount equal to three times the sum of (i) Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company and (ii) the greater of (x) the highest annual bonus earned by Executive during any of the last three fiscal years of Company ending prior to the Change in Control, and (y) 45% of the maximum annual incentive bonus amount pursuant to Section 2.2 that Executive could have earned for the year during which Executive's employment with Company terminates.
(7) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(8) "Committee" shall mean the Compensation Committee of the Board of Directors.
(9) "Company" shall mean Core Laboratories N.V. and its Affiliates.
(10) "Effective Date" shall mean August 1, 2007.
(11) "Executive" shall mean John D. Denson.
(12) "Good Reason" shall mean termination by Executive of Executive's employment with Company within sixty days of and in connection with or due to (i) a significant change in the nature, status, or scope of Executive's duties, responsibilities, or authorities, (ii) a permanent change and relocation of Executive's principal place of employment with Company, which is more than fifty miles away from the prior location, (iii) a material breach by Company of any material provision of this Agreement which, if correctable, remains uncorrected for thirty days following written notice of such breach by Executive to Company, (iv) a material diminution in Executive's participation in bonus, stock option, incentive award, and other compensation plans provided by Company for executives with comparable duties, (v) a material diminution in employee benefits (including but not limited to medical, dental, life insurance, and long-term disability plans) and perquisites applicable to Executive from the employee benefits and perquisites provided by Company to executives with comparable duties, or (vi) in Executive's sole judgment, the scope of Executive's position or continued employment within Company being no longer appropriate.
(13) "Grandfathered Severance Amount" shall mean $580,475, which amount is equal to the "Termination Payment" that Executive would have received pursuant to the terms of the Prior Employment Agreement if Executive had voluntarily terminated his employment with the Company (for any reason whatsoever or for no reason) on December 31, 2004.
(14) "Prior Employment Agreement" shall mean that certain Employment Agreement between Core Laboratories N.V. and Executive that was restated as of December 31, 2001, as amended.
(15) "Severance Benefits" shall mean all of the following:
(i) Continued coverage under Company's medical, dental, and group life insurance plans (or, as the case may be, those of the Affiliate at whose offices Executive spends a majority of his working time) shall be provided for Executive and those of Executive's dependents (including Executive's spouse) who were covered under such plans on the day prior to Executive's termination of employment with Company for thirty-six months from the date of such termination at no cost to Executive or Executive's dependents; provided, however, that (1) such coverage shall be subject to all of the terms and conditions of such plans, including, without limitation, eligibility provisions, (2) such coverage shall terminate if and to the extent Executive or Executive's dependents become covered by the medical, dental, and life insurance plans of a subsequent employer (and any such coverage shall be promptly reported to Company by Executive), (3) if Executive (and/or Executive's spouse) would have been enti tled to retiree medical, dental, and/or life insurance coverage under Company's plans (or such Affiliate's plans, as the case may be) had Executive voluntarily retired on the date of such termination, then such coverages shall be continued as provided under such plans), and (4) in the event that continued participation in any such Company plan is not permitted by the terms of such plan, Company shall use its best efforts to arrange, upon comparable terms, benefits substantially equivalent to those that were provided under such Company plan (or such Affiliate's plan, as the case may be). The medical and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or such Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(ii) All of the outstanding stock options granted by Company to Executive shall become fully vested and immediately exercisable in full upon Executive's termination of employment and for a period of three months thereafter or for such greater period as may be provided in the plan or plans pursuant to which such stock options were granted (but in no event shall any such stock option be exercisable after the earlier of the expiration of the original term of such stock option or the 10th anniversary of the original date of grant of such stock option).
(iii) Company shall provide Executive with reasonable outplacement services at a cost not to exceed 100% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company; provided, however, that such outplacement services shall in no event be provided beyond the last day of the second taxable year of Executive following the taxable year of Executive in which Executive's termination of employment with Company occurred.
(iv) Notwithstanding the coverage therefor under any other provision hereof including clause (i) above, (provided that in no case shall this subsection require Company to provide duplicative benefits coverage under its own programs), Executive shall be provided a benefits package (for so long as Executive or Executive's spouse or dependent children shall live) including medical, hospital, dental, disability and life insurance plans and coverage (including supplemental insurance plans and coverage) for Executive and Executive's spouse and dependent children at least as favorable (including premium payments no higher than the lowest employee cost of such coverage) to Executive (and Executive's spouse and/or dependent children) as those provided immediately prior to termination unless, with respect to any particular plan or coverage, the continuation of such existing plan or coverage would have material adverse financial or regulatory consequences for the Company, in which case the plan or coverage will be provided through one or more individual insurance plan(s) paid for by Company or be self funded by the Company with comparable individual coverage at its expense. The medical, hospital and dental coverage described in the preceding sentence shall be provided through an arrangement that satisfies the requirements of Sections 105 and 106 of the Code such that the benefits or reimbursements under such arrangement are not includible in Executive's income (and, if continued coverage under Company's plans (or an Affiliate's plans, as the case may be) does not satisfy this requirement, then Company shall arrange, upon comparable terms, for coverage providing substantially equivalent benefits to be provided under one or more insurance policies that will satisfy this requirement).
(16) "Termination Payment" shall mean a lump sum payment in an amount equal to the sum of (i) 200% of Executive's annual base salary as in effect pursuant to Section 2.1 immediately prior to Executive's termination of employment with Company and (ii) two times 45% of the maximum annual incentive bonus amount pursuant to Section 2.2 that Executive could have earned for the year during which Executive's employment with Company terminates.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the 5th day of March, 2008, to be effective as of the Effective Date.
CORE LABORATORIES N.V.
By Core Laboratories International B.V.,
its sole managing director
By: /s/ JAN WILLEM SODDERLAND
Jan Willem Sodderland
Managing Director of
Core Laboratories International B.V.
EXECUTIVE
/s/ John D. Denson 9; 9; 9; 9;
John D. Denson
Houston 3332780v1
AMENDMENT TO
CORE LABORATORIES
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, CORE LABORATORIES N.V. and its participating affiliates (the "Company") have heretofore adopted the CORE LABORATORIES SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (the "Plan") for the benefit of certain employees and independent directors of the Company; and
WHEREAS, no individuals have commenced participation in the Plan after October 3, 2004, no new benefits have been accrued under the Plan after December 31, 2004, and the Company has no intention of permitting any individual to commence participation in the Plan or accrue an additional benefit under the Plan in the future; and
WHEREAS, as of December 31, 2004, all participants in the Plan were fully vested in the full amount of their potential benefit under the Plan; and
WHEREAS, the benefits of the participants in the Plan should not be subject to the application of section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), unless such benefits are materially modified; and
WHEREAS, the Company desires to amend the Plan to freeze participation under the Plan and to define the grandfathered Plan benefit under section 409A of the Code in accordance with the requirements of the final regulations issued under section 409A of the Code;
NOW, THEREFORE, the Plan shall be amended as follows, effective as of January 1, 2005:
"Notwithstanding any provision in the Plan to the contrary, no individual shall commence participation under the Plan from and after January 1, 2005."
"4.5 The entire accrued benefit of each Participant in the Plan is intended to be grandfathered under section 409A of the Internal Revenue Code of 1986, as amended (the "Code"). The amount of each Participant's grandfathered benefit shall be a benefit calculated under Section 4.1 determined as if the Participant had separated from service with the Company as of December 31, 2004, which benefit (i) is not dependant on any compensation earned by the Participant after December 31, 2004, (ii) is not dependant on the Participant's service with the Company completed after December 31, 2004, and (iii) to the extent required under section 409A of the Code, shall equal the maximum grandfathered benefit permitted with respect to the Plan for such Participant determined under the provisions of section 409A of the Code (and the administrative guidance thereunder that is applicable to the determination of amounts deferred under a nonaccount balance plan prior to January 1, 2005, and the earnings th ereon, including Treasury regulation section 1.409A-6(a)(3)(i) and (iv)). For purposes of making any present value calculations required in accordance with clause (iii) of the preceding sentence as of December 31, 2004 or any other date the benefit is valued for purposes of determining the Participant's grandfathered benefit, the actuarial assumptions specified in Section 1.1(17) that would have applied if the payment date described in such Section was December 31, 2004 shall be used."
EXECUTED
on this 5th day of March, 2008.Core Laboratories N.V.
By Core Laboratories International B.V.,
its sole managing director
By: /s/ JAN WILLEM SODDERLAND
Jan Willem Sodderland
Managing Director of
Core Laboratories International B.V.
Houston 3326180v1
Core Laboratories
Supplemental Executive Retirement Plan
for
Monty L. Davis
As Amended and Restated
Effective as of January 1, 2005
Core Laboratories
Supplemental Executive Retirement Plan
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN and deferred compensation agreement is made and entered into by and between Core Laboratories N.V. (the "Company") and Monty L. Davis ("Executive").
W
I T N E S S E T H:WHEREAS, Executive is currently employed as Chief Operating Officer and Senior Vice President by one or more members of the Company Group (as such term is hereinafter defined); and
WHEREAS, the services of Executive as an employee of the Company Group have been substantial and meritorious; and
WHEREAS, the Company and Executive have heretofore entered into that certain CORE LABORATORIES SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN effective as of January 1, 1999 (as amended, the "Plan") because the Company desired to recognize the value to the Company of past and present services of Executive and to reward Executive for his contributions to the success and growth of the Company and to encourage Executive to remain in the employment of the Company Group through the use of additional but deferred compensation; and
WHEREAS, the American Jobs Creation Act of 2004 amended the Code (as such term is hereinafter defined) by adding section 409A to the Code, which section imposes new requirements on certain nonqualified deferred compensation arrangements (including the Plan); and
WHEREAS, the Company and Executive desire to amend and restate the Plan in order to (1) maintain the grandfathered status under section 409A of the Code of Executive's benefit deferred prior to January 1, 2005, and (2) otherwise bring the Plan into compliance with the requirements of section 409A of the Code;
NOW, THEREFORE, the Plan is hereby restated in its entirety as follows with no interruption in time, effective as of January 1, 2005, and the Company and Executive agree as follows:
I.
Definitions
1.1 Definitions. Where the following words and phrases appear in the Plan, they shall have the meanings set forth below, unless their context clearly indicates to the contrary.
(1) Actuarial Equivalent or Actuarial Equivalence: A lump sum payment that, as of the lump sum payment date, is actuarially equal in value to the aggregate amounts of Executive's vested accrued benefit expected to be received under the annual installment form of payment based upon (i) the Applicable Mortality Table (as defined in section 417(e)(3)(A)(ii)(I) of the Code) and (ii) using an interest rate that is 80% of the applicable federal rate (determined under section 1274(d) of the Code and the regulations thereunder) compounded annually, for the month in which the lump sum is paid.
(2) Anniversary Date: Each anniversary of Executive's Retirement Date.
(3) Board: The Board of Supervisory Directors of the Company.
(4) Change in Control: Any of the following: (i) a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, (A) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of th e votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of the Company, (iii) when any person or entity, including a "group" as contemplated by section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any affiliate of the Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if the Company has not engaged in a merger or consolidation, the Company, or (B) if the Company has engaged i n a merger or consolidation, the resulting entity, or (iv) a change in the composition of the Board, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of the Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board" shall refer to the board of directors (or comparable governing body) of the re sulting entity, and (3) "Incumbent Directors" shall mean directors who either (a) are directors of the Company as of February 28, 2003, or (b) are elected, or nominated for election, to the Board with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or nomination, but Incumbent Director shall not include an individual whose election or nomination occurs as a result of either (x) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or (y) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board.
Notwithstanding the foregoing, for purposes of Section 2.7, under no circumstances shall any of the foregoing events constitute a Change in Control unless such event also constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of section 409A(a)(2)(A)(v) of the Code (and applicable administrative guidance thereunder).
(5) Change in Control Event: Any of the following: (i) the occurrence of a Change in Control while Executive is employed by the Company Group; (ii) the termination of Executive's employment with the Company Group within the six-month period ending on the date a Change in Control occurs for a reason other than Executive's conviction of a felony or a misdemeanor involving moral turpitude; or (iii) the termination or amendment of the Plan in a manner that is to the detriment of Executive (or anyone who would be entitled to benefits hereunder upon the death of Executive) without Executive's consent if the adoption date or effective date of such termination or amendment occurs within the six-month period ending on the date a Change in Control occurs.
(6) Code: The Internal Revenue Code of 1986, as amended.
(7) Company: Core Laboratories N.V.
(8) Company Group: The Company and any subsidiary or affiliate of the Company designated from time to time by the Committee in its discretion. From January 1, 1999, through April 30, 2001, the Company Group consisted solely of the Company and Core Laboratories, Inc. From and after May 1, 2001, the Company Group shall consist solely of the Company and Core Laboratories LP.
(9) Committee: The Compensation Committee of the Board.
(10) Compensation: For each Plan Year, the total base salary paid by the Company Group to or for the benefit of Executive for services rendered or labor performed for the Company Group while Executive is an employee of the Company Group. Executive's base salary shall be determined by including any portion thereof that Executive could have received in cash in lieu of (i) elective deferrals under Code sections 125 and 402(e)(3) and (ii) deferrals by Executive under a non-qualified deferred compensation plan maintained by the Company Group.
(11) Date of Hire: April 1, 1998.
(12) Death Benefit: A benefit calculated under Section 3.2 and paid in accordance with Article III.
(13) Designated Beneficiary: Executive's beneficiary or beneficiaries determined in accordance with Section 8.1.
(14) Effective Date: January 1, 2005, as to this amendment and restatement of the Plan. The original effective date of the Plan was January 1, 1999.
(15) Executive: Monty L. Davis.
(16) Final Average Pay: The average of Executive's annual Compensation for the five consecutive Plan Years (or, if shorter, all consecutive Plan Years) immediately preceding the Plan Year in which occurs the earlier of (i) the termination of Executive's employment with the Company Group or (ii) the death of Executive; provided, however, that in the event of a Change in Control prior to the termination of Executive's employment with the Company Group, "Final Average Pay" shall be the greater of (i) the average of Executive's annual Compensation for the five consecutive Plan Years (or, if shorter, all consecutive Plan Years) immediately preceding the Plan Year in which occurs the Change in Control or (ii) the average of Executive's annual Compensation for the five consecutive Plan Years (or, if shorter, all consecutive Plan Years) immediately preceding the Plan Year in which occurs the earlier of (1) the termination of Executive's employment with the Company Group or (2) th e death of Executive.
(17) Grandfathered Benefit: A benefit calculated under Section 2.2 determined as if Executive had terminated employment with the Company Group immediately prior to the Effective Date and without regard to (i) any Compensation earned by Executive after December 31, 2004, or (ii) months of Executive's employment with the Company Group completed after December 31, 2004; provided, however, that in no event shall such benefit be greater than the maximum grandfathered benefit permitted with respect to the Plan determined under the provisions of section 409A of the Code (and the administrative guidance thereunder that is applicable to the determination of amounts deferred under a nonaccount balance plan prior to the Effective Date and the earnings thereon, including Treasury regulation section 1.409A-6(a)(3)(i) and (iv)). For purposes of making any present value calculations required in accordance with the proviso of the preceding sentence as of December 31, 2004 or any other d ate the benefit is valued for purposes of determining the Grandfathered Benefit, the actuarial assumptions specified in Section 1.1(1) that would have applied if the payment date described in such Section was December 31, 2004 shall be used.
(18) Insolvent: The Company either (i) is unable to pay its debts as they become due or (ii) is subject to a pending proceeding as a debtor under the United States Bankruptcy Code (or any successor federal statute).
(19) Non-Grandfathered Benefit: The portion of the Retirement Benefit that is in excess of the Grandfathered Benefit.
(20) Plan: This Core Laboratories Supplemental Executive Retirement Plan, as amended from time to time.
(21) Plan Year: The twelve-consecutive month period commencing January 1 of each year.
(22) Retirement Benefit: A benefit calculated under Section 2.2 and paid in accordance with Article II.
(23) Retirement Date: The later of (i) the first date after January 1, 1999, on which Executive incurs a Termination of Service or (ii) the date Executive attains the age of sixty-five.
(24) Termination of Service: Executive's separation from service with the Company and its affiliates with the meaning of section 409A(a)(2)(A)(i) of the Code (and applicable administrative guidance thereunder).
(25) Trust: The trust, if any, established under the Trust Agreement.
(26) Trust Agreement: The agreement, if any, entered into between the Company and the Trustee pursuant to Section 6.2.
(27) Trustee: An independent third party that may be granted corporate trustee powers under state law and which has been appointed by the Board to be the trustee qualified and acting under the Trust Agreement at any time.
(28) Years of Accrual Service: The total of all completed months of Executive's employment with (i) the Company Group commencing on his Date of Hire and (ii) Dresser Industries, Inc. and Western Atlas, Inc. for periods prior to his Date of Hire (which totals 193 months prior to his Date of Hire), and ending (1) for purposes of calculating Executive's Retirement Benefit, on the first date after January 1, 1999, on which Executive is not employed by the Company Group and (2) for purposes of calculating Executive's Death Benefit, on the date of Executive's death, in either case divided by twelve.
1.2 Number and Gender. Whenever appropriate herein, words used in the singular shall be considered to include the plural, and words used in the plural shall be considered to include the singular. The masculine gender, where appearing herein, shall be deemed to include the feminine gender.
1.3 Headings. The headings of Articles and Sections herein are included solely for convenience, and, if there is any conflict between such headings and the text of this Plan, the text shall control.
II.
Retirement Benefit
2.1 Entitlement to Retirement Benefit. Subject to the delayed payment restriction of Section 2.8, Executive shall be entitled to receive a Retirement Benefit, calculated in accordance with Section 2.2, upon his Retirement Date.
2.2 Retirement Benefit. Executive's "Retirement Benefit" shall be an annual payment equal to 2% of Executive's Final Average Pay, multiplied by Executive's Years of Accrual Service (not to exceed 25 years); provided, however, that if a Change in Control Event occurs, then Executive's Retirement Benefit shall be no less than an annual payment equal to $150,000.
2.3 Commencement and Duration of Retirement Benefit Payments. Except as provided in Sections 2.6 and 2.7, Executive's Retirement Benefit shall be paid to Executive once each calendar year during his lifetime (except to the extent the delayed payment restriction of Section 2.8 may require two payments during a particular calendar year). Subject to the delayed payment restriction of Section 2.8, the first such annual payment shall be paid to Executive on Executive's Retirement Date (or the next business day following such date if such date is not a business day), and each subsequent annual payment shall be paid on each Anniversary Date thereafter (or the next business day following such date if such date is not a business day) until the date of Executive's death. Except as provided in Section 2.4, all payments of Executive's Retirement Benefit shall cease upon the death of Executive.
2.4 Death on or After Retirement Date. If Executive dies on or after his Retirement Date and prior to receiving fifteen annual installment payments of his Retirement Benefit, then no Death Benefit shall be payable, but Executive's Retirement Benefit shall be paid, or continue to be paid, to Executive's Designated Beneficiary in annual installments at the same time and in the same amount as such Retirement Benefit would have been paid to Executive had Executive's death not occurred, and such Retirement Benefit installments shall continue through the Anniversary Date upon which Executive would have received the fifteenth Retirement Benefit installment. In the event of the death of a Designated Beneficiary prior to the payment of the fifteenth Retirement Benefit installment, such Designated Beneficiary's share of any remaining installments of Executive's Retirement Benefit shall be paid to such Designated Beneficiary's estate at the same time, in the same amount, and for th e same period of time such Retirement Benefit would have been paid to such Designated Beneficiary had his or her death not occurred. All payments of deceased Executive's Retirement Benefit pursuant to this Section shall cease upon the date of payment of what would have been the deceased Executive's fifteenth Retirement Benefit installment.
2.5 Code Section 162(m) Limitation. The preceding Sections of this Article notwithstanding, no Retirement Benefit shall be paid to the extent such payment, when added to all other remuneration provided to Executive by the Company or any affiliate, would result in any such amount being nondeductible under section 162(m) of the Code, and the payment of any such Retirement Benefit shall be deferred to the first subsequent year in which such payment may be both paid and fully deductible by the Company. In the event payment of a Retirement Benefit is deferred pursuant to this Section, such deferral shall not affect the time of payment or amount of any other installment of Executive's Retirement Benefit, unless such other payment is itself deferred pursuant to this Section. Notwithstanding the foregoing, this Section shall not apply to the Non-Grandfathered Benefit unless all scheduled payments to Executive that could be nondeductible under section 162(m) of the Code are also delayed as provided in Treasury regulation section 1.409A-2(b)(7)(i).
2.6 Change in Control Lump Sum Elections for Grandfathered Benefit. With respect to the Grandfathered Benefit, in lieu of the annual installment payments provided by Section 2.3 that are attributable to such benefit, Executive may irrevocably elect (in such manner as proscribed by the Committee) to receive his Grandfathered Benefit paid in a single lump sum payment on or as soon as administratively feasible following a Change in Control. Such lump sum shall be an amount that is the Actuarial Equivalent of the installment payments attributable to the Grandfathered Benefit that would otherwise be payable to Executive beginning on his Retirement Date (or if such installments have already commenced prior to the Change in Control, the Actuarial Equivalent of such remaining installments due Executive (or his Designated Beneficiary if he has died prior to the Change in Control)). Except as provided in the following paragraph, to be effective, the election must be made while th e Executive is an employee or a director of the Company and at least one year prior to both the date of Executive's 65th birthday and the date of the Change in Control.
If Executive has not timely made the election provided in the preceding paragraph, or is not eligible to make such election as provided in the last sentence of such paragraph, then Executive (or, if deceased at the time of the Change in Control, his Designated Beneficiary) may irrevocably elect (in such manner as proscribed by the Committee) to receive a lump sum payment with respect to the Grandfathered Benefit on or as soon as administratively feasible after the Change in Control (or, if the election is made following the Change in Control, as soon as administratively feasible after the election). The lump sum shall be an amount equal to 90% of the Actuarial Equivalence of his then Grandfathered Benefit (or, if it is already in pay status, the Grandfathered Benefit remaining to be paid). Upon such lump sum payment, the remaining portion of Executive's Grandfathered Benefit automatically shall be forfeited.
2.7 Change in Control Lump Sum for Non-Grandfathered Benefit. With respect to the Non-Grandfathered Benefit, in lieu of the annual installment payments provided by Section 2.3 that are attributable to such benefit, Executive's Non-Grandfathered Benefit shall be paid in a single lump sum payment on or as soon as administratively feasible following a Change in Control (but in no event earlier than January 1, 2008). Such lump sum shall be an amount that is the Actuarial Equivalent of the installment payments attributable to the Non-Grandfathered Benefit that would otherwise be payable to Executive beginning on his Retirement Date (or if such installments have already commenced prior to the Change in Control, the Actuarial Equivalent of such remaining installments due Executive (or his Designated Beneficiary if he has died prior to the Change in Control)).
2.8 Delayed Payment Restriction. If Executive is a specified employee within the meaning of section 409A(a)(2)(B)(i) of the Code (and applicable administrative guidance thereunder), then payment of Executive's Non-Grandfathered Benefit under Section 2.3 shall not commence prior to the earlier of (1) the date that is six months after Executive's Termination of Service or (2) the date of death of Executive. In such event, payments, if any, with respect to Executive's Non-Grandfathered Benefit to which Executive would have otherwise been entitled during the first six months following Executive's Termination of Service (or, if earlier, prior to his date of death) shall be accumulated and paid in the form of a single lump sum payment to Executive on the date that is six months after Executive's Termination of Service or to Executive's Designated Beneficiary on the date of Executive's death, as applicable. If this Section becomes applicable such that the payment of any amount is delayed, any payments that are so delayed shall accrue interest on a non-compounded basis, from the date such amount would have otherwise been paid absent the application of this Section to the actual date of payment, at the prime rate of interest as reported in The Wall Street Journal on the date of Executive's Termination of Service (or the first business day following such date if such termination does not occur on a business day) and shall be paid in a lump sum on the actual date of payment of the delayed payment amount. Executive hereby agrees to be bound by the Company's determination of its "specified employees" (as such term is defined in Section 409A of the Code) in accordance with any of the methods permitted under the regulations issued under Section 409A of the Code.
III.
Death Benefit
3.1 Entitlement to Death Benefit. If Executive dies prior to his Retirement Date, a Death Benefit, calculated in accordance with Section 3.2, shall be paid under this Article III. If Executive dies on or after his Retirement Date, no Death Benefit shall be paid under the Plan, but Executive's Retirement Benefit shall cease or be paid in accordance with Section 2.4.
3.2 Death Benefit. Executive's Death Benefit shall be an annual payment equal to the greater of (1) or (2) below:
(1) 2% of Executive's Final Average Pay, multiplied by Executive's Years of Accrual Service (not to exceed 25 years); or
(2) $150,000.
3.3 Commencement and Duration of Death Benefit. If Executive dies prior to his Retirement Date, then Executive's Death Benefit shall be paid to his Designated Beneficiary once each year for fifteen years. The first such annual payment shall be paid to Executive's Designated Beneficiary on the date of Executive's death (or the next business day following such date if such date is not a business day), and each subsequent annual payment shall be paid to Executive's Designated Beneficiary on each anniversary of Executive's death (or the next business day following such date if such date is not a business day) until the payment of fifteen annual Death Benefit payments. In the event of the death of a Designated Beneficiary prior to the payment of fifteen Death Benefit installments, such Designated Beneficiary's share of any remaining installments of Executive's Death Benefit shall be paid to such Designated Beneficiary's estate at the same time, in the same amount, and for the same period of time such Death Benefit would have been paid to such Designated Beneficiary had his or her death not occurred. All payments of Executive's Death Benefit pursuant to this Section shall cease upon the payment of the fifteenth installment of such Death Benefit.
IV.
Vesting and Forfeiture
4.1 Vested Interest and Forfeiture upon Termination for Cause. Executive shall at all times have a 100% vested and nonforfeitable interest in his Plan benefit; provided, however, that in the event Executive's employment with the Company Group or any affiliate is terminated by reason of Executive's conviction of a felony or a misdemeanor involving moral turpitude, then all benefits payable under the Plan to Executive or his Designated Beneficiary shall be forfeited, and neither Executive nor his Designated Beneficiary shall be entitled to receive, or continue to receive, any benefit under the Plan.
V.
Administration of Plan
5.1 Committee Administration. The plan shall be administered by the Committee. The Committee shall supervise the administration of the Plan according to the terms and provisions hereof and shall have the sole discretionary authority and all of the powers necessary to accomplish these purposes, including, without limitation, the sole discretionary authority to interpret and construe all Plan terms and to make all factual determinations associated with the Plan. All such interpretations, constructions, and determinations shall be final and binding upon Executive and all other persons. No member of the Committee shall be liable to Executive or any other person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own willful misconduct or lack of good faith.
5.2 Committee Appointment, Removal. Each member of the Committee shall be appointed and removed by and in the sole discretion of the Board and shall serve in accordance with applicable rules and procedures of the Board and the Committee.
VI.
Unfunded Nature of Plan
6.1 "Top Hat" Plan. The Plan is intended to constitute an unfunded, unsecured plan of deferred compensation for a select group of management or highly compensated employees of the Company Group. Further, it is the intention of the Company that the Plan be unfunded for purposes of the Code and Title I of the Employee Retirement Income Security Act of 1974, as amended. The Plan constitutes a mere promise by the Company to make benefit payments in the future. Plan benefits hereunder provided are to be paid out of the Company's general assets, and Executive shall have the status of, and shall have no better status than, a general unsecured creditor of the Company.
6.2 Discretionary Establishment of Rabbi Trust. The Board, in its sole discretion, may select the Trustee, establish the Trust, and enter into the Trust Agreement with the Trustee. Any such Trust established by the Board, and any assets held by such Trust to assist the Company in meeting its obligations under the Plan, shall conform in all material respects to the terms of the model rabbi trust set forth in Revenue Procedure 92-64, 1992-2 C.B. 422. The Company may transfer money and/or other property to the Trustee, and the Trustee shall pay Plan benefits to Executive and his beneficiaries out of the Trust assets if such benefits are not paid by the Company. In the event the Trust is established, the Company shall remain the owner of all assets in the Trust, and the assets shall be subject to the claims of Company creditors in the event (and only in the event) the Company ever becomes Insolvent. Neither Executive nor any beneficiary of Executive shall have any prefer red claim to, any security interest in, or any beneficial ownership interest in any assets of the Trust.
6.3 Insolvency of Company. The Board and the Chief Executive Officer of the Company shall each have the duty to inform the Trustee in writing if the Company becomes Insolvent. Such notice given under the preceding sentence by any one party shall satisfy each party's duty to give notice. When so informed, the Trustee shall suspend any payments to Executive or his Designated Beneficiary, as applicable, and hold the assets for the benefit of the Company's general creditors and shall determine within the period specified in the Trust Agreement, or, in the absence of a specified period, within a reasonable period of time, whether the Company is Insolvent. If the Trustee determines that the Company is not Insolvent, the Trustee shall (1) resume payments to Executive or his Designated Beneficiary, as applicable, and (2) make a payment to Executive or his Designated Beneficiary, as applicable, as soon as administratively feasible after such determination, in an aggregate amount equal to the difference between the payments that would have been made to such individual(s) by the Trustee but for this Section 6.3 and the aggregate payments actually made to such individual(s) by the Company pursuant to the Plan during any such period of discontinuance (plus interest on such amount calculated at the prime rate as reported in The Wall Street Journal as of the date of such discontinuance from the time that such payment or payments were due until their actual payment).
VII.
Amendment and Termination
7.1 Amendment. Subject to the provisions of Section 7.3, the Board may, in its discretion, amend the Plan, in whole or in part, at any time; provided, however, that no amendment shall be made that would reduce the accrued benefit of Executive or, without Executive's written consent, adversely affect any of Executive's rights (vested or contingent) hereunder with respect to his accrued benefit, including, without limitation, the timing and the form of payment of such benefit and the definition of Actuarial Equivalent used to determine the lump sum present value of his accrued benefit.
7.2 Termination. Subject to the provisions of Section 7.3, (1) the Board may, in its discretion, terminate the Plan in whole or in part at any time and (2) in the event the Plan is terminated, notwithstanding any other provision of the Plan, the Board, it its discretion, may pay Executive his payable but unpaid vested accrued Retirement Benefit (or, in the case of Executive's death, Executive's Designated Beneficiary any payable but unpaid Death Benefit or Retirement Benefit) either in accordance with Article II or III, as applicable, or in any other manner the Board deems appropriate, including, without limitation, a lump sum payment that is the Actuarial Equivalent of such unpaid Retirement Benefit or Death Benefit.
7.3 Limitations on Amendment and Termination. To the extent required by section 409A of the Code, the Plan may not be amended or terminated in a manner that would give rise to an impermissible acceleration of the time or form of a payment of the Non-Grandfathered Benefit under the Plan pursuant to section 409A(a)(3) of the Code (and applicable administrative guidance thereunder).
VIII.
Miscellaneous
8.1 Designation of Beneficiaries. Executive shall have the right to designate the beneficiary or beneficiaries to receive payment of his benefit in the event of his death. Each such designation shall be made in writing filed with the Committee by Executive. Any such designation may be changed at any time by Executive by execution and filing of a new designation in accordance with this Section. If no beneficiary designation is on file with the Committee at the time of the death of Executive or if such designation is not effective for any reason as determined by the Committee, the designated beneficiary or beneficiaries to receive such death benefit shall be as follows:
(1) If Executive leaves a surviving spouse, his designated beneficiary shall be such surviving spouse; and
(2) If Executive leaves no surviving spouse, his designated beneficiary shall be (A) Executive's executor or administrator or (B) his heirs at law if there is no administration of Executive's estate.
Notwithstanding the preceding provisions of this Section and to the extent not prohibited by state or federal law, if Executive is divorced from his spouse and at the time of his death is not remarried to the person from whom he was divorced, any designation of such divorced spouse as his beneficiary under the Plan filed prior to the divorce shall be null and void unless the contrary is expressly stated in writing filed with the Committee by Executive. The interest of such divorced spouse failing hereunder shall vest in the persons specified in the preceding provisions of this Section as if such divorced spouse was not designated as a beneficiary by Executive. Further, if any individual designated by Executive as a beneficiary under the Plan fails to survive Executive by 30 days, then such designation of such individual as a beneficiary shall be null and void, and the interest of such individual failing hereunder shall vest in the persons specified in the preceding provisions of this Sec tion as if such individual was not designated as a beneficiary by Executive.
8.2 No Assignment or Alienation. The interest of Executive in the Plan or of his Designated Beneficiary hereunder may not be anticipated, sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void. The benefits provided hereunder shall not be liable for, or subject to the debts, contracts, liabilities, engagements, or torts of, any person to whom such benefits are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process, nor shall they be an asset of the bankrupt's estate in bankruptcy.
8.3 No Contract of Employment. Nothing contained in the Plan or in the adoption of the Plan shall confer on Executive the right to continued employment with the Company Group or any affiliate or affect in any way the right of the Company Group to terminate the employment or services of Executive at any time. Nothing contained in the Plan shall be construed to affect the provisions of any other plan maintained by the Company Group or shall prevent the Company Group from adopting or continuing in effect other or additional compensation arrangements affecting Executive.
8.4 Binding Effect. The Plan shall be binding upon, and inure to the benefit of, the Company, its successors, and assigns, and Executive and his respective heirs, executors, administrators, and legal representatives.
8.5 Severability. In case any provision of the Plan is determined by a court of competent jurisdiction to be illegal, invalid, or unenforceable for any reason, such illegal, invalid, or unenforceable provision shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal, invalid, or unenforceable provision had not been included therein.
8.6 Jurisdiction. Except to the extent federal law applies and preempts state law, the Plan shall be construed, enforced, and administered according to the laws of the state of Texas, excluding any conflict-of-law rule or principle that might refer construction of the Plan to the laws of another state or country. In the event of litigation relating to the Plan, such litigation shall be brought in state or federal court residing in Houston, Harris County, Texas, and the Company and Executive (or persons claiming rights of or through Executive) irrevocably appoints the Secretary of State for the state of Texas as agent for receipt of service of process in connection with such litigation.
8.7 Withholding. All benefit payments provided for hereunder shall be subject to applicable withholding and other deductions as shall be required under applicable local, state, or federal law.
[Signatures begin on next page.]
Executed
on this 5th day of March, 2008, effective as of the Effective Date.Core Laboratories N.V.
By Core Laboratories International B.V.,
its sole managing director
By: /s/ JAN WILLEM SODDERLAND
Jan Willem Sodderland
Managing Director of
Core Laboratories International B.V.
Monty L. Davis
/s/ Monty L. Davis
Houston 3326093v1
Core Laboratories
Supplemental Executive Retirement Plan
for
John D. Denson
As Amended and Restated
Effective as of January 1, 2005
Core Laboratories
Supplemental Executive Retirement Plan
THIS SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN and deferred compensation agreement is made and entered into by and between Core Laboratories N.V. (the "Company") and John D. Denson ("Executive").
W
I T N E S S E T H:WHEREAS, Executive is currently employed as general counsel by one or more members of the Company Group (as such term is hereinafter defined); and
WHEREAS, the services of Executive as an employee of the Company Group have been substantial and meritorious; and
WHEREAS, the Company and Executive have heretofore entered into that certain CORE LABORATORIES SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN effective as of January 1, 1999 (as amended, the "Plan") because the Company desired to recognize the value to the Company of past and present services of Executive and to reward Executive for his contributions to the success and growth of the Company and to encourage Executive to remain in the employment of the Company Group through the use of additional but deferred compensation; and
WHEREAS, the American Jobs Creation Act of 2004 amended the Code (as such term is hereinafter defined) by adding section 409A to the Code, which section imposes new requirements on certain nonqualified deferred compensation arrangements (including the Plan); and
WHEREAS, the Company and Executive desire to amend and restate the Plan in order to (1) maintain the grandfathered status under section 409A of the Code of Executive's benefit deferred prior to January 1, 2005, and (2) otherwise bring the Plan into compliance with the requirements of section 409A of the Code;
NOW, THEREFORE, the Plan is hereby restated in its entirety as follows with no interruption in time, effective as of January 1, 2005, and the Company and Executive agree as follows:
I.
Definitions
1.1 Definitions. Where the following words and phrases appear in the Plan, they shall have the meanings set forth below, unless their context clearly indicates to the contrary.
(1) Actuarial Equivalent or Actuarial Equivalence: A lump sum payment that, as of the lump sum payment date, is actuarially equal in value to the aggregate amounts of Executive's vested accrued benefit expected to be received under the annual installment form of payment based upon (i) the Applicable Mortality Table (as defined in section 417(e)(3)(A)(ii)(I) of the Code) and (ii) using an interest rate that is 80% of the applicable federal rate (determined under section 1274(d) of the Code and the regulations thereunder) compounded annually, for the month in which the lump sum is paid.
(2) Anniversary Date: Each anniversary of Executive's Retirement Date.
(3) Board: The Board of Supervisory Directors of the Company.
(4) Change in Control: Any of the following: (i) a merger of the Company with another entity, a consolidation involving the Company, or the sale of all or substantially all of the assets of the Company to another entity if, in any such case, (A) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, 50% or more of the common equity of the resulting entity, (B) the holders of equity securities of the Company immediately prior to such transaction or event do not beneficially own immediately after such transaction or event, in substantially the same proportions that they owned the equity securities of the Company immediately prior to such transaction or event, equity securities of the resulting entity entitled to 50% or more of th e votes then eligible to be cast in the election of directors generally (or comparable governing body) of the resulting entity, or (C) the persons who were members of the Board immediately prior to such transaction or event shall not constitute at least a majority of the board of directors of the resulting entity immediately after such transaction or event, (ii) shareholder approval of a plan of dissolution or liquidation of the Company, (iii) when any person or entity, including a "group" as contemplated by section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any affiliate of the Company), acquires or gains ownership or control (including, without limitation, power to vote) of more than 30% of the combined voting power of the outstanding securities of, (A) if the Company has not engaged in a merger or consolidation, the Company, or (B) if the Company has engaged i n a merger or consolidation, the resulting entity, or (iv) a change in the composition of the Board, as a result of which fewer than a majority of the supervisory directors are Incumbent Directors. For purposes of the preceding sentence, (1) "resulting entity" in the context of a transaction or event that is a merger, consolidation or sale of all or substantially all assets shall mean the surviving entity (or acquiring entity in the case of an asset sale) unless the surviving entity (or acquiring entity in the case of an asset sale) is a subsidiary of another entity and the holders of common equity of the Company receive capital stock of such other entity in such transaction or event, in which event the resulting entity shall be such other entity, (2) subsequent to the consummation of a merger or consolidation that does not constitute a Change in Control, the term "Company" shall refer to the resulting entity and the term "Board" shall refer to the board of directors (or comparable governing body) of the re sulting entity, and (3) "Incumbent Directors" shall mean directors who either (a) are directors of the Company as of February 28, 2003, or (b) are elected, or nominated for election, to the Board with the affirmative votes of at least two-thirds of the Incumbent Directors at the time of such election or nomination, but Incumbent Director shall not include an individual whose election or nomination occurs as a result of either (x) an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or (y) an actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board.
Notwithstanding the foregoing, for purposes of Section 2.7, under no circumstances shall any of the foregoing events constitute a Change in Control unless such event also constitutes a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of section 409A(a)(2)(A)(v) of the Code (and applicable administrative guidance thereunder).
(5) Change in Control Event: Any of the following: (i) the occurrence of a Change in Control while Executive is employed by the Company Group; (ii) the termination of Executive's employment with the Company Group within the six-month period ending on the date a Change in Control occurs for a reason other than Executive's conviction of a felony or a misdemeanor involving moral turpitude; or (iii) the termination or amendment of the Plan in a manner that is to the detriment of Executive (or anyone who would be entitled to benefits hereunder upon the death of Executive) without Executive's consent if the adoption date or effective date of such termination or amendment occurs within the six-month period ending on the date a Change in Control occurs.
(6) Code: The Internal Revenue Code of 1986, as amended.
(7) Company: Core Laboratories N.V.
(8) Company Group: The Company and any subsidiary or affiliate of the Company designated from time to time by the Committee in its discretion. From January 1, 1999, through April 30, 2001, the Company Group consisted solely of the Company and Core Laboratories, Inc. From and after May 1, 2001, the Company Group shall consist solely of the Company and Core Laboratories LP.
(9) Committee: The Compensation Committee of the Board.
(10) Compensation: For each Plan Year, the total base salary paid by the Company Group to or for the benefit of Executive for services rendered or labor performed for the Company Group while Executive is an employee of the Company Group. Executive's base salary shall be determined by including any portion thereof that Executive could have received in cash in lieu of (i) elective deferrals under Code sections 125 and 402(e)(3) and (ii) deferrals by Executive under a non-qualified deferred compensation plan maintained by the Company Group.
(11) Date of Hire: August 10, 1992.
(12) Death Benefit: A benefit calculated under Section 3.2 and paid in accordance with Article III.
(13) Designated Beneficiary: Executive's beneficiary or beneficiaries determined in accordance with Section 8.1.
(14) Effective Date: January 1, 2005, as to this amendment and restatement of the Plan. The original effective date of the Plan was January 1, 1999.
(15) Executive: John D. Denson.
(16) Final Average Pay: The average of Executive's annual Compensation for the five consecutive Plan Years (or, if shorter, all consecutive Plan Years) immediately preceding the Plan Year in which occurs the earlier of (i) the termination of Executive's employment with the Company Group or (ii) the death of Executive; provided, however, that in the event of a Change in Control prior to the termination of Executive's employment with the Company Group, "Final Average Pay" shall be the greater of (i) the average of Executive's annual Compensation for the five consecutive Plan Years (or, if shorter, all consecutive Plan Years) immediately preceding the Plan Year in which occurs the Change in Control or (ii) the average of Executive's annual Compensation for the five consecutive Plan Years (or, if shorter, all consecutive Plan Years) immediately preceding the Plan Year in which occurs the earlier of (1) the termination of Executive's employment with the Company Group or (2) th e death of Executive.
(17) Grandfathered Benefit: A benefit calculated under Section 2.2 determined as if Executive had terminated employment with the Company Group immediately prior to the Effective Date and without regard to (i) any Compensation earned by Executive after December 31, 2004, or (ii) months of Executive's employment with the Company Group completed after December 31, 2004; provided, however, that in no event shall such benefit be greater than the maximum grandfathered benefit permitted with respect to the Plan determined under the provisions of section 409A of the Code (and the administrative guidance thereunder that is applicable to the determination of amounts deferred under a nonaccount balance plan prior to the Effective Date and the earnings thereon, including Treasury regulation section 1.409A-6(a)(3)(i) and (iv)). For purposes of making any present value calculations required in accordance with the proviso of the preceding sentence as of December 31, 2004 or any other d ate the benefit is valued for purposes of determining the Grandfathered Benefit, the actuarial assumptions specified in Section 1.1(1) that would have applied if the payment date described in such Section was December 31, 2004 shall be used.
(18) Insolvent: The Company either (i) is unable to pay its debts as they become due or (ii) is subject to a pending proceeding as a debtor under the United States Bankruptcy Code (or any successor federal statute).
(19) Non-Grandfathered Benefit: The portion of the Retirement Benefit that is in excess of the Grandfathered Benefit.
(20) Plan: This Core Laboratories Supplemental Executive Retirement Plan, as amended from time to time.
(21) Plan Year: The twelve-consecutive month period commencing January 1 of each year.
(22) Retirement Benefit: A benefit calculated under Section 2.2 and paid in accordance with Article II.
(23) Retirement Date: The later of (i) the first date after January 1, 1999, on which Executive incurs a Termination of Service or (ii) the date Executive attains the age of sixty-five.
(24) Termination of Service: Executive's separation from service with the Company and its affiliates with the meaning of section 409A(a)(2)(A)(i) of the Code (and applicable administrative guidance thereunder).
(25) Trust: The trust, if any, established under the Trust Agreement.
(26) Trust Agreement: The agreement, if any, entered into between the Company and the Trustee pursuant to Section 6.2.
(27) Trustee: An independent third party that may be granted corporate trustee powers under state law and which has been appointed by the Board to be the trustee qualified and acting under the Trust Agreement at any time.
(28) Years of Accrual Service: The total of all completed months of Executive's employment with the Company Group commencing on his Date of Hire and ending (i) for purposes of calculating Executive's Retirement Benefit, on the first date after January 1, 1999, on which Executive is not employed by the Company Group and (ii) for purposes of calculating Executive's Death Benefit, on the date of Executive's death, in either case divided by twelve.
1.2 Number and Gender. Whenever appropriate herein, words used in the singular shall be considered to include the plural, and words used in the plural shall be considered to include the singular. The masculine gender, where appearing herein, shall be deemed to include the feminine gender.
1.3 Headings. The headings of Articles and Sections herein are included solely for convenience, and, if there is any conflict between such headings and the text of this Plan, the text shall control.
II.
Retirement Benefit
2.1 Entitlement to Retirement Benefit. Subject to the delayed payment restriction of Section 2.8, Executive shall be entitled to receive a Retirement Benefit, calculated in accordance with Section 2.2, upon his Retirement Date.
2.2 Retirement Benefit. Executive's "Retirement Benefit" shall be an annual payment equal to 2% of Executive's Final Average Pay, multiplied by Executive's Years of Accrual Service (not to exceed 25 years); provided, however, that if a Change in Control Event occurs, then Executive's Retirement Benefit shall be no less than an annual payment equal to $150,000.
2.3 Commencement and Duration of Retirement Benefit Payments. Except as provided in Sections 2.6 and 2.7, Executive's Retirement Benefit shall be paid to Executive once each calendar year during his lifetime (except to the extent the delayed payment restriction of Section 2.8 may require two payments during a particular calendar year). Subject to the delayed payment restriction of Section 2.8, the first such annual payment shall be paid to Executive on Executive's Retirement Date (or the next business day following such date if such date is not a business day), and each subsequent annual payment shall be paid on each Anniversary Date thereafter (or the next business day following such date if such date is not a business day) until the date of Executive's death. Except as provided in Section 2.4, all payments of Executive's Retirement Benefit shall cease upon the death of Executive.
2.4 Death on or After Retirement Date. If Executive dies on or after his Retirement Date and prior to receiving fifteen annual installment payments of his Retirement Benefit, then no Death Benefit shall be payable, but Executive's Retirement Benefit shall be paid, or continue to be paid, to Executive's Designated Beneficiary in annual installments at the same time and in the same amount as such Retirement Benefit would have been paid to Executive had Executive's death not occurred, and such Retirement Benefit installments shall continue through the Anniversary Date upon which Executive would have received the fifteenth Retirement Benefit installment. In the event of the death of a Designated Beneficiary prior to the payment of the fifteenth Retirement Benefit installment, such Designated Beneficiary's share of any remaining installments of Executive's Retirement Benefit shall be paid to such Designated Beneficiary's estate at the same time, in the same amount, and for th e same period of time such Retirement Benefit would have been paid to such Designated Beneficiary had his or her death not occurred. All payments of deceased Executive's Retirement Benefit pursuant to this Section shall cease upon the date of payment of what would have been the deceased Executive's fifteenth Retirement Benefit installment.
2.5 Code Section 162(m) Limitation. The preceding Sections of this Article notwithstanding, no Retirement Benefit shall be paid to the extent such payment, when added to all other remuneration provided to Executive by the Company or any affiliate, would result in any such amount being nondeductible under section 162(m) of the Code, and the payment of any such Retirement Benefit shall be deferred to the first subsequent year in which such payment may be both paid and fully deductible by the Company. In the event payment of a Retirement Benefit is deferred pursuant to this Section, such deferral shall not affect the time of payment or amount of any other installment of Executive's Retirement Benefit, unless such other payment is itself deferred pursuant to this Section. Notwithstanding the foregoing, this Section shall not apply to the Non-Grandfathered Benefit unless all scheduled payments to Executive that could be nondeductible under section 162(m) of the Code are also delayed as provided in Treasury regulation section 1.409A-2(b)(7)(i).
2.6 Change in Control Lump Sum Elections for Grandfathered Benefit. With respect to the Grandfathered Benefit, in lieu of the annual installment payments provided by Section 2.3 that are attributable to such benefit, Executive may irrevocably elect (in such manner as proscribed by the Committee) to receive his Grandfathered Benefit paid in a single lump sum payment on or as soon as administratively feasible following a Change in Control. Such lump sum shall be an amount that is the Actuarial Equivalent of the installment payments attributable to the Grandfathered Benefit that would otherwise be payable to Executive beginning on his Retirement Date (or if such installments have already commenced prior to the Change in Control, the Actuarial Equivalent of such remaining installments due Executive (or his Designated Beneficiary if he has died prior to the Change in Control)). Except as provided in the following paragraph, to be effective, the election must be made while th e Executive is an employee or a director of the Company and at least one year prior to both the date of Executive's 65th birthday and the date of the Change in Control.
If Executive has not timely made the election provided in the preceding paragraph, or is not eligible to make such election as provided in the last sentence of such paragraph, then Executive (or, if deceased at the time of the Change in Control, his Designated Beneficiary) may irrevocably elect (in such manner as proscribed by the Committee) to receive a lump sum payment with respect to the Grandfathered Benefit on or as soon as administratively feasible after the Change in Control (or, if the election is made following the Change in Control, as soon as administratively feasible after the election). The lump sum shall be an amount equal to 90% of the Actuarial Equivalence of his then Grandfathered Benefit (or, if it is already in pay status, the Grandfathered Benefit remaining to be paid). Upon such lump sum payment, the remaining portion of Executive's Grandfathered Benefit automatically shall be forfeited.
2.7 Change in Control Lump Sum for Non-Grandfathered Benefit. With respect to the Non-Grandfathered Benefit, in lieu of the annual installment payments provided by Section 2.3 that are attributable to such benefit, Executive's Non-Grandfathered Benefit shall be paid in a single lump sum payment on or as soon as administratively feasible following a Change in Control (but in no event earlier than January 1, 2008). Such lump sum shall be an amount that is the Actuarial Equivalent of the installment payments attributable to the Non-Grandfathered Benefit that would otherwise be payable to Executive beginning on his Retirement Date (or if such installments have already commenced prior to the Change in Control, the Actuarial Equivalent of such remaining installments due Executive (or his Designated Beneficiary if he has died prior to the Change in Control)).
2.8 Delayed Payment Restriction. If Executive is a specified employee within the meaning of section 409A(a)(2)(B)(i) of the Code (and applicable administrative guidance thereunder), then payment of Executive's Non-Grandfathered Benefit under Section 2.3 shall not commence prior to the earlier of (1) the date that is six months after Executive's Termination of Service or (2) the date of death of Executive. In such event, payments, if any, with respect to Executive's Non-Grandfathered Benefit to which Executive would have otherwise been entitled during the first six months following Executive's Termination of Service (or, if earlier, prior to his date of death) shall be accumulated and paid in the form of a single lump sum payment to Executive on the date that is six months after Executive's Termination of Service or to Executive's Designated Beneficiary on the date of Executive's death, as applicable. If this Section becomes applicable such that the payment of any amount is delayed, any payments that are so delayed shall accrue interest on a non-compounded basis, from the date such amount would have otherwise been paid absent the application of this Section to the actual date of payment, at the prime rate of interest as reported in The Wall Street Journal on the date of Executive's Termination of Service (or the first business day following such date if such termination does not occur on a business day) and shall be paid in a lump sum on the actual date of payment of the delayed payment amount. Executive hereby agrees to be bound by the Company's determination of its "specified employees" (as such term is defined in Section 409A of the Code) in accordance with any of the methods permitted under the regulations issued under Section 409A of the Code.
III.
Death Benefit
3.1 Entitlement to Death Benefit. If Executive dies prior to his Retirement Date, a Death Benefit, calculated in accordance with Section 3.2, shall be paid under this Article III. If Executive dies on or after his Retirement Date, no Death Benefit shall be paid under the Plan, but Executive's Retirement Benefit shall cease or be paid in accordance with Section 2.4.
3.2 Death Benefit. Executive's Death Benefit shall be an annual payment equal to the greater of (1) or (2) below:
(1) 2% of Executive's Final Average Pay, multiplied by Executive's Years of Accrual Service (not to exceed 25 years); or
(2) $150,000.
3.3 Commencement and Duration of Death Benefit. If Executive dies prior to his Retirement Date, then Executive's Death Benefit shall be paid to his Designated Beneficiary once each year for fifteen years. The first such annual payment shall be paid to Executive's Designated Beneficiary on the date of Executive's death (or the next business day following such date if such date is not a business day), and each subsequent annual payment shall be paid to Executive's Designated Beneficiary on each anniversary of Executive's death (or the next business day following such date if such date is not a business day) until the payment of fifteen annual Death Benefit payments. In the event of the death of a Designated Beneficiary prior to the payment of fifteen Death Benefit installments, such Designated Beneficiary's share of any remaining installments of Executive's Death Benefit shall be paid to such Designated Beneficiary's estate at the same time, in the same amount, and for the same period of time such Death Benefit would have been paid to such Designated Beneficiary had his or her death not occurred. All payments of Executive's Death Benefit pursuant to this Section shall cease upon the payment of the fifteenth installment of such Death Benefit.
IV.
Vesting and Forfeiture
4.1 Vested Interest and Forfeiture upon Termination for Cause. Executive shall at all times have a 100% vested and nonforfeitable interest in his Plan benefit; provided, however, that in the event Executive's employment with the Company Group or any affiliate is terminated by reason of Executive's conviction of a felony or a misdemeanor involving moral turpitude, then all benefits payable under the Plan to Executive or his Designated Beneficiary shall be forfeited, and neither Executive nor his Designated Beneficiary shall be entitled to receive, or continue to receive, any benefit under the Plan.
V.
Administration of Plan
5.1 Committee Administration. The plan shall be administered by the Committee. The Committee shall supervise the administration of the Plan according to the terms and provisions hereof and shall have the sole discretionary authority and all of the powers necessary to accomplish these purposes, including, without limitation, the sole discretionary authority to interpret and construe all Plan terms and to make all factual determinations associated with the Plan. All such interpretations, constructions, and determinations shall be final and binding upon Executive and all other persons. No member of the Committee shall be liable to Executive or any other person for any action taken or omitted in connection with the administration of the Plan unless attributable to his own willful misconduct or lack of good faith.
5.2 Committee Appointment, Removal. Each member of the Committee shall be appointed and removed by and in the sole discretion of the Board and shall serve in accordance with applicable rules and procedures of the Board and the Committee.
VI.
Unfunded Nature of Plan
6.1 "Top Hat" Plan. The Plan is intended to constitute an unfunded, unsecured plan of deferred compensation for a select group of management or highly compensated employees of the Company Group. Further, it is the intention of the Company that the Plan be unfunded for purposes of the Code and Title I of the Employee Retirement Income Security Act of 1974, as amended. The Plan constitutes a mere promise by the Company to make benefit payments in the future. Plan benefits hereunder provided are to be paid out of the Company's general assets, and Executive shall have the status of, and shall have no better status than, a general unsecured creditor of the Company.
6.2 Discretionary Establishment of Rabbi Trust. The Board, in its sole discretion, may select the Trustee, establish the Trust, and enter into the Trust Agreement with the Trustee. Any such Trust established by the Board, and any assets held by such Trust to assist the Company in meeting its obligations under the Plan, shall conform in all material respects to the terms of the model rabbi trust set forth in Revenue Procedure 92-64, 1992-2 C.B. 422. The Company may transfer money and/or other property to the Trustee, and the Trustee shall pay Plan benefits to Executive and his beneficiaries out of the Trust assets if such benefits are not paid by the Company. In the event the Trust is established, the Company shall remain the owner of all assets in the Trust, and the assets shall be subject to the claims of Company creditors in the event (and only in the event) the Company ever becomes Insolvent. Neither Executive nor any beneficiary of Executive shall have any prefer red claim to, any security interest in, or any beneficial ownership interest in any assets of the Trust.
6.3 Insolvency of Company. The Board and the Chief Executive Officer of the Company shall each have the duty to inform the Trustee in writing if the Company becomes Insolvent. Such notice given under the preceding sentence by any one party shall satisfy each party's duty to give notice. When so informed, the Trustee shall suspend any payments to Executive or his Designated Beneficiary, as applicable, and hold the assets for the benefit of the Company's general creditors and shall determine within the period specified in the Trust Agreement, or, in the absence of a specified period, within a reasonable period of time, whether the Company is Insolvent. If the Trustee determines that the Company is not Insolvent, the Trustee shall (1) resume payments to Executive or his Designated Beneficiary, as applicable, and (2) make a payment to Executive or his Designated Beneficiary, as applicable, as soon as administratively feasible after such determination, in an aggregate amount equal to the difference between the payments that would have been made to such individual(s) by the Trustee but for this Section 6.3 and the aggregate payments actually made to such individual(s) by the Company pursuant to the Plan during any such period of discontinuance (plus interest on such amount calculated at the prime rate as reported in The Wall Street Journal as of the date of such discontinuance from the time that such payment or payments were due until their actual payment).
VII.
Amendment and Termination
7.1 Amendment. Subject to the provisions of Section 7.3, the Board may, in its discretion, amend the Plan, in whole or in part, at any time; provided, however, that no amendment shall be made that would reduce the accrued benefit of Executive or, without Executive's written consent, adversely affect any of Executive's rights (vested or contingent) hereunder with respect to his accrued benefit, including, without limitation, the timing and the form of payment of such benefit and the definition of Actuarial Equivalent used to determine the lump sum present value of his accrued benefit.
7.2 Termination. Subject to the provisions of Section 7.3, (1) the Board may, in its discretion, terminate the Plan in whole or in part at any time and (2) in the event the Plan is terminated, notwithstanding any other provision of the Plan, the Board, it its discretion, may pay Executive his payable but unpaid vested accrued Retirement Benefit (or, in the case of Executive's death, Executive's Designated Beneficiary any payable but unpaid Death Benefit or Retirement Benefit) either in accordance with Article II or III, as applicable, or in any other manner the Board deems appropriate, including, without limitation, a lump sum payment that is the Actuarial Equivalent of such unpaid Retirement Benefit or Death Benefit.
7.3 Limitations on Amendment and Termination. To the extent required by section 409A of the Code, the Plan may not be amended or terminated in a manner that would give rise to an impermissible acceleration of the time or form of a payment of the Non-Grandfathered Benefit under the Plan pursuant to section 409A(a)(3) of the Code (and applicable administrative guidance thereunder).
VIII.
Miscellaneous
8.1 Designation of Beneficiaries. Executive shall have the right to designate the beneficiary or beneficiaries to receive payment of his benefit in the event of his death. Each such designation shall be made in writing filed with the Committee by Executive. Any such designation may be changed at any time by Executive by execution and filing of a new designation in accordance with this Section. If no beneficiary designation is on file with the Committee at the time of the death of Executive or if such designation is not effective for any reason as determined by the Committee, the designated beneficiary or beneficiaries to receive such death benefit shall be as follows:
(1) If Executive leaves a surviving spouse, his designated beneficiary shall be such surviving spouse; and
(2) If Executive leaves no surviving spouse, his designated beneficiary shall be (A) Executive's executor or administrator or (B) his heirs at law if there is no administration of Executive's estate.
Notwithstanding the preceding provisions of this Section and to the extent not prohibited by state or federal law, if Executive is divorced from his spouse and at the time of his death is not remarried to the person from whom he was divorced, any designation of such divorced spouse as his beneficiary under the Plan filed prior to the divorce shall be null and void unless the contrary is expressly stated in writing filed with the Committee by Executive. The interest of such divorced spouse failing hereunder shall vest in the persons specified in the preceding provisions of this Section as if such divorced spouse was not designated as a beneficiary by Executive. Further, if any individual designated by Executive as a beneficiary under the Plan fails to survive Executive by 30 days, then such designation of such individual as a beneficiary shall be null and void, and the interest of such individual failing hereunder shall vest in the persons specified in the preceding provisions of this Sec tion as if such individual was not designated as a beneficiary by Executive.
8.2 No Assignment or Alienation. The interest of Executive in the Plan or of his Designated Beneficiary hereunder may not be anticipated, sold, transferred, assigned, or encumbered in any manner, either voluntarily or involuntarily, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or charge the same shall be null and void. The benefits provided hereunder shall not be liable for, or subject to the debts, contracts, liabilities, engagements, or torts of, any person to whom such benefits are payable, nor shall they be subject to garnishment, attachment, or other legal or equitable process, nor shall they be an asset of the bankrupt's estate in bankruptcy.
8.3 No Contract of Employment. Nothing contained in the Plan or in the adoption of the Plan shall confer on Executive the right to continued employment with the Company Group or any affiliate or affect in any way the right of the Company Group to terminate the employment or services of Executive at any time. Nothing contained in the Plan shall be construed to affect the provisions of any other plan maintained by the Company Group or shall prevent the Company Group from adopting or continuing in effect other or additional compensation arrangements affecting Executive.
8.4 Binding Effect. The Plan shall be binding upon, and inure to the benefit of, the Company, its successors, and assigns, and Executive and his respective heirs, executors, administrators, and legal representatives.
8.5 Severability. In case any provision of the Plan is determined by a court of competent jurisdiction to be illegal, invalid, or unenforceable for any reason, such illegal, invalid, or unenforceable provision shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal, invalid, or unenforceable provision had not been included therein.
8.6 Jurisdiction. Except to the extent federal law applies and preempts state law, the Plan shall be construed, enforced, and administered according to the laws of the state of Texas, excluding any conflict-of-law rule or principle that might refer construction of the Plan to the laws of another state or country. In the event of litigation relating to the Plan, such litigation shall be brought in state or federal court residing in Houston, Harris County, Texas, and the Company and Executive (or persons claiming rights of or through Executive) irrevocably appoints the Secretary of State for the state of Texas as agent for receipt of service of process in connection with such litigation.
8.7 Withholding. All benefit payments provided for hereunder shall be subject to applicable withholding and other deductions as shall be required under applicable local, state, or federal law.
[Signatures begin on next page.]
Executed
on this 5th day of March, 2008, effective as of the Effective Date.Core Laboratories N.V.
By Core Laboratories International B.V.,
its sole managing director
By: /s/ JAN WILLEM SODDERLAND
Jan Willem Sodderland
Managing Director of
Core Laboratories International B.V.
John D. Denson
/s/ John D. Denson
Houston 3197542v3
Certification
Exhibit 31.1
I, David M. Demshur, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Laboratories N.V. (the "Registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and |
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and |
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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. |
Date: May 8, 2008 |
By: |
/s/ David M. Demshur |
David M. Demshur |
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Chief Executive Officer |
Certification
Exhibit 31.2
I, Richard L. Bergmark, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Core Laboratories N.V. (the "Registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and |
5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and |
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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. |
Date: May 8, 2008 |
By: |
/s/ Richard L. Bergmark |
Richard L. Bergmark |
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Chief Financial Officer |
Exhibit 32.1
Certification of
Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, David M. Demshur, Chief Executive Officer of Core Laboratories N.V. (the "Company"), hereby certify that the accompanying report on Form 10-Q for the quarter ended March 31, 2008, filed by the Company with the Securities and Exchange Commission on the date hereof fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, (the "Report").
I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 8, 2008 |
/s/ David M. Demshur |
Name: David M. Demshur |
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Title: Chief Executive Officer |
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Exhibit 32.2
Certification of
Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
I, Richard L. Bergmark, Chief Financial Officer of Core Laboratories N.V. (the "Company"), hereby certify that the accompanying report on Form 10-Q for the quarter ended March 31, 2008, filed by the Company with the Securities and Exchange Commission on the date hereof fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, (the "Report").
I further certify that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 8, 2008 |
/s/ Richard L. Bergmark |
Name: Richard L. Bergmark |
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Title: Chief Financial Officer |
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