Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain
Officers; Compensatory Arrangements of Certain Officers.
On March 9, 2017, Dril-Quip, Inc. (the “Company”) announced that
Mr. Jeffrey Bird has been appointed Vice President and Chief Financial Officer effective March 13, 2017 and that Mr. Jerry M. Brooks, Vice President — Finance and Chief Financial Officer, has accepted the newly created
position of Vice President of Investor Relations, effective March 13, 2017.
Mr. Bird, age 50, served as Executive Vice President and Chief
Financial Officer of Frank’s International, a provider of engineered tubular services to the oil and gas industry, from December 2014 through February 2017. Prior to joining Frank’s International, Mr. Bird was the Vice President of
Finance and Chief Financial Officer of Ascend Performance Materials, a provider of chemicals, fibers and plastics in Houston, Texas, since September 2010. Prior to joining Ascend, Mr. Bird served in a variety of accounting and finance roles
primarily in the industrial manufacturing sector including serving as a division Chief Financial Officer at Danaher Corporation. Mr. Bird holds a bachelor’s degree in Accounting from Cedarville University in Ohio.
Bird Employment Agreement
In connection with his
appointment, on March 7, 2017, the Company entered into an employment agreement with Mr. Bird (the “Bird Employment Agreement”) effective as of March 13, 2017 (the “Effective Date”), which has an initial term until
December 8, 2019, but automatically extends for additional
one-year
periods. The Bird Employment Agreement is subject to the right of the Company and Mr. Bird to terminate his employment at any time.
Pursuant to the Bird Employment Agreement, Mr. Bird will receive an annual base salary of $450,000 and will be eligible to receive an annual bonus to be determined each year in accordance with the Company’s normal bonus practices or under
any annual bonus plan adopted by the Company after the Effective Date. Mr. Bird will also be entitled to 20 days paid vacation subject to the Company’s policies, to receive benefits consistent with other senior executives of the Company,
including medical, life and disability insurance, and to participate in the Company’s incentive, savings and retirement plans. Mr. Bird will also be entitled to a cash
sign-on
bonus of $200,000 and
an initial equity award with a grant date fair market value of $1,500,000 (the “Initial Equity Grant”) with (i) 50% of the Initial Equity Grant granted in the form of restricted stock that vests in
one-third
tranches on October 28th of each of 2017, 2018 and 2019, subject to continuous employment with the Company on such vesting dates, and (ii) the remaining 50% of the Initial Equity Grant in the
form of performance-based stock units that vest on October 28, 2019 (based on the performance goals previously approved by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) for the
performance period ending October 28, 2019), subject to continuous employment with the Company on such vesting date, in each case subject to the terms and conditions set forth in the 2004 Incentive Plan of the Company and the applicable award
agreements in a form previously approved by the Compensation Committee.
If Mr. Bird’s employment is terminated by the Company without cause (as
defined in the Bird Employment Agreement) and prior to a change of control period (as defined in the Bird Employment Agreement), Mr. Bird will be entitled to (i) a lump sum cash payment equal to Mr. Bird’s base salary through the
termination date together with compensation for accrued vacation
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time (the “Accrued Amount”), (ii) a lump sum cash payment equal to one times the annual base salary and (iii) continued medical, dental and life insurance coverage until the
earlier of Mr. Bird’s receipt of equivalent coverage and benefits under other plans of a subsequent employer or one year. If, prior to December 8, 2019, Mr. Bird’s employment is terminated by the Company without cause or by
Mr. Bird for good reason (as defined in the Bird Employment Agreement), then with respect to the Initial Equity Grant, Mr. Bird will be entitled to (i) immediate vesting of all unvested shares of restricted stock and (ii) the
vesting of the performance-based stock units based on actual results at the end of the relevant performance period and without any
pro-rata
adjustment for early termination, payable at the same time as if
Mr. Bird had remained employed through the end of the applicable performance period.
If Mr. Bird’s employment is terminated during a
change of control period by the Company without cause or by Mr. Bird for good reason, Mr. Bird will be entitled to (i) a lump sum cash payment equal to the Accrued Amount, (ii) a lump sum cash payment equal to two times
Mr. Bird’s annual base salary, (iii) a lump sum cash payment equal to a pro rata portion of the greater of the annual bonus for the year of termination or the average annual bonus amount paid for the three most recent performance
periods (as defined in the Bird Employment Agreement), (iv) a lump sum cash payment in an amount equal to two times the greater of the annual bonus for the year of termination or the average annual bonus amount paid for the three most recent
performance periods, (v) immediate vesting of any stock options, restricted stock awards or performance stock units previously granted to Mr. Bird and outstanding as of the time immediately prior to the date of his termination and
(vi) continued medical, dental and life insurance coverage until the earlier of Mr. Bird’s receipt of equivalent coverage and benefits under other plans of a subsequent employer or two years.
If Mr. Bird’s termination is with cause, is for other than for good reason during a change of control period or due to death or disability,
Mr. Bird will be entitled to (i) a lump sum cash payment equal to the Accrued Amount and (ii) the provision of deferred compensation and other employee benefits otherwise due.
In addition, Mr. Bird is subject to a perpetual covenant not to use or disclose the Company’s trade secrets or confidential information and, if
Mr. Bird is terminated after the first anniversary of the Effective Date,
non-competition
and
non-solicitation
covenants during the term of his employment and for
12 months following his termination.
The foregoing summary of the Bird Employment Agreement does not purport to be complete and is subject to, and
qualified in its entirety by, the full text of the Bird Employment Agreement, a copy of which is filed as Exhibit 10.1 hereto.
Bird Indemnification
Agreement
The Company also entered into an indemnification agreement with Mr. Bird pursuant to which the Company agrees to indemnify him to
the fullest extent permitted by applicable law, from and against any and all losses, liabilities, claims, damages and certain expenses arising out of an event or occurrence related to the fact that he is an officer of the Company or serves in
another position at the request of the Company. The indemnification agreement is substantially similar to the Company’s indemnification agreements with its other executive officers and directors. The foregoing description is qualified by
reference to the terms of the indemnification agreement, a copy of the form of which is provided as Exhibit 10.2.
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The selection of Mr. Bird was not pursuant to any agreement or understanding between him and any other
person. There is no family relationship between Mr. Bird and any director or executive officer of the Company. There are no transactions between Mr. Bird and the Company that are required to be reported under Item 404(a) of Regulation
S-K.
Brooks Employment Agreement
In connection with the announcement, on March 7, 2017, the Company entered into an employment agreement with Mr. Brooks (the “Brooks Employment
Agreement”), which has a
one-year
term. The Brooks Employment Agreement is subject to the right of the Company and Mr. Brooks to terminate his employment at any time. Pursuant to the Brooks
Employment Agreement, Mr. Brooks (i) will receive an annual base salary of $305,000 and (ii) at the expiration of the
one-year
term of the agreement, will receive a bonus of $75,000 (the
“Bonus”). Subject to Mr. Brooks’ continuous employment with the Company during the
one-year
term, as of the last day of the term (the “Expiration Date”), the Company shall provide
for (a) the immediate vesting, settlement and exercisability of, and termination of any restrictions on sale or transfer (other than any such restriction arising by operation of law) with respect to, each and every restricted stock award that
is subject to time-based vesting that is outstanding immediately prior to the Expiration Date (
i.e.
, restricted stock awards) and (b) the vesting of any performance award that is subject to performance-based vesting based on actual
results at the end of the relevant performance period and without any
pro-rata
adjustment for early termination, payable at the same time as if Mr. Brooks had remained employed through the end of the
applicable performance period. Mr. Brooks will also be entitled to paid vacation in accordance with the Company’s policies, to receive benefits consistent with other senior executives of the Company, including medical, life and disability
insurance, and to participate in the Company’s savings and retirement plans.
If Mr. Brooks’ employment is terminated by the Company
without cause (as defined in the Brooks Employment Agreement) and prior to a change of control period (as defined in the Brooks Employment Agreement), Mr. Brooks will be entitled to (i) a lump sum cash payment equal to
Mr. Brooks’ base salary through his termination date together with compensation for accrued vacation time (the “Accrued Amount”), (ii) a lump sum cash payment equal to the Bonus, (iii) the immediate vesting of all
outstanding restricted stock awards and (iv) the vesting of all performance stock unit awards based on actual results at the end of the relevant performance period and without any
pro-rata
adjustment for
early termination, payable at the same time as if Mr. Brooks had remained employed through the end of the applicable performance period.
If
Mr. Brooks’ employment is terminated during a change of control period by the Company without cause or by Mr. Brooks for good reason (as defined in the Brooks Employment Agreement), Mr. Brooks will be entitled to (i) a lump
sum cash payment equal to the Accrued Amount, (ii) a lump sum cash payment equal to two times Mr. Brooks’ annual base salary, (iii) a lump sum cash payment equal to a pro rata portion of the Bonus, (iv) a lump sum cash
payment in an amount equal to two times the average annual bonus amount paid for the three most recent years prior to the termination date, (v) immediate vesting of any stock options, restricted stock
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awards or restricted stock units previously granted to Mr. Brooks and outstanding as of the time immediately prior to the date of his termination and (vi) continued medical, dental and
life insurance coverage until the earlier of Mr. Brooks’ receipt of equivalent coverage and benefits under other plans of a subsequent employer or two years.
If Mr. Brooks’ termination is with cause, is for other than for good reason during a change of control period or due to death or disability,
Mr. Brooks will be entitled to (i) a lump sum cash payment equal to the Accrued Amount and (ii) the provision of deferred compensation and other employee benefits otherwise due.
In addition, Mr. Brooks is subject to a perpetual covenant not to use or disclose the Company’s trade secrets or confidential information and
non-competition
and
non-solicitation
covenants during the term of his employment and for 12 months following his termination. The foregoing summary of the Brooks Employment
Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Brooks Employment Agreement, a copy of which is filed as Exhibit 10.3 hereto.