CLB 2019 Proxy Statement

43 of (i) one year following such termination, or (ii) the period provided in the plan or plans pursuant to which such stock options were granted, and the lump-sum payment described in clause (a) above would be equal to three times the sum of: • his base salary as in effect immediately prior to his termination of employment; and • the greater of (A) 45% of the maximum annual incentive bonus he could have earned pursuant to his employment contract for the year in which his employment terminates or (B) the highest annual bonus he received in the three fiscal years ending prior to the fiscal year in which occurred the change in control. The employment agreement generally uses the following terms: "Cause" means the executive has been convicted of any felony or a misdemeanor involving moral turpitude. "Change in Control" means 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 if (i) the holders of equity securities of the Company immediately prior to the transaction do not beneficially own immediately after the transaction 50% or more of the common equity of the resulting entity, (ii) the holders of equity securities of the Company immediately prior to the transaction do not beneficially own immediately after the transaction 50% of the voting securities of the resulting entity, or (iii) the persons who were members of the Supervisory Board of Directors immediately prior to the transaction are not the majority of the board of the resulting entity immediately after the transaction. A Change in Control also occurs when (i) there is shareholder approval of a plan of dissolution or liquidation of the Company, (ii) any person or entity acquires or gains ownership of control of more than 30% of the combined voting power of outstanding securities of the Company or resulting entity, or (iii) a change in the composition of the Supervisory Board of Directors the results of which are that fewer than a majority of the supervisory directors are incumbent directors. Mr. Demshur's employment agreement contains a standard confidentiality and nonsolicitation provision and requires that the executive not compete with the business conducted by the Company at any time during the period that he is employed by the Company and for the two-year period thereafter unless his employment with the Company is terminated by him for good reason, or by the Company for cause. Notwithstanding, the post-employment noncompetition and nonsolicitation restrictions terminate upon a change in control of the Company. Upon a change in control, Mr. Demshur may be subject to (and Messrs. Bergmark and Davis would have been while they were employed by the Company prior to their retirement) certain excise taxes pursuant to Section 4999 of the IRS Code (which imposes a 20% excise tax on certain excess parachute payments). In such case, we have agreed to pay each of these NEOs a gross- up payment such that, after the payment of any income, excise or other tax on the gross-up payment, they would retain an amount sufficient to pay all excise taxes pursuant to Section 4999 of the IRS Code. This arrangement is not included in the new employment agreements for Messrs. Bruno and Hill and, furthermore, the Company will not add tax gross-up provisions in any future employment contracts. The calculation of the Section 4999 gross-up amounts described above is based upon an excise tax rate under Section 4999 of 20%, a 35% federal income tax rate and a 1.45%Medicare tax rate. For purposes of the gross-up calculations, we have assumed that (1) no amountswill be discounted as attributable to reasonable compensation and (2) all cash severance payments are contingent on a change in control (although we believe there may be a viable position to the contrary with respect to at least a portion of the cash severance payments). The tax gross-up payment described above will be payable to the executive for any excise tax incurred under Section 4999 of the IRS Code regardless of whether his employment is terminated. However, the amount of the gross-up payment will change based upon whether the executive's employment with us is terminated because the amount of compensation subject to the Section 4999 excise tax will change. The provision of the tax gross-up payment was included in the named executive's employment contracts entered into in 1998, when the provision of tax gross-up payments was standard in our industry. Nonqualified Deferred Compensation Plan See the Nonqualified Deferred Compensation Table and subsequent narrative discussion for a description of the benefits payable to Messrs. Demshur, Bergmark and Davis under the Nonqualified Deferred Compensation Plan upon death or separation from service and in connection with a change in control. Supplemental Executive Retirement Plan Please see the Post-Employment Benefit Plans table and narrative that follows the table for a discussion of the benefits payable to Messrs. Demshur and Bergmark under the Group SERP and Mr. Davis under the Individual SERP upon death or separation from service, and in connection with a change in control. As described in the sections "Group SERP" and "Individual SERP" on page 32 of this proxy statement, if a participant in the Group SERP or an Individual SERP made a timely election, he would be