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EXHIBIT 10.5
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AMENDMENT NO. 2
TO
EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT (this "Amendment") is made
and entered into as of December 3, 1998, by and between XXXXXX NATURAL GAS
SERVICES, INC., a Delaware corporation (the "Corporation"), and W. XXXXXXX
XXXXXX ("Officer").
RECITALS
WHEREAS, the Corporation and Officer have previously entered into that
certain Employment Agreement, dated as of June 11, 1991, and amended as of July
14, 1997 (as so amended and as the same may hereafter be amended or otherwise
modified from time to time, the "Employment Agreement"); and
WHEREAS, the Corporation and Officer now desire to amend the Employment
Agreement in order to extend the period of Officer's employment with the
Corporation; and
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is desirable and in the best interests of the Corporation and
its stockholders to (1) assure that the Corporation will have the continued
dedication of Officer, notwithstanding the possibility, threat or occurrence of
a change in control of the Corporation, (2) diminish the inevitable distraction
of the Officer by virtue of the personal uncertainties and risks created by a
pending or threatened change in control and to encourage the Corporation's full
attention and dedication to the Corporation currently and in the event of any
threatened or pending change in control, and (3) provide Officer with
compensation and benefits arrangements upon a change in control which ensure
that the compensation and benefits expectations of Officer will be satisfied and
which are competitive with those of other corporations;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound hereby, agree as
follows:
SECTION 1. AMENDMENTS TO EMPLOYMENT AGREEMENT. Effective as of the date
hereof, the Employment Agreement shall be amended as provided in this Section 1.
(a) AMENDMENT TO SECTION 2.1. Section 2.1 of the Employment
Agreement is hereby amended to read in its entirety as
follows:
"2.1 Basic Term. The term of Officer's employment under
this Agreement shall continue for a period of three years from
December 3, 1998, unless terminated earlier pursuant to this
Section 2 (the "Employment Period");
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provided, however, that unless the Corporation or Officer
gives to the other written notice at least six months prior to
the expiration of such three-year term of any successive
one-year extension term as provided hereafter, the Employment
Period shall be automatically extended for successive one-year
terms, unless and until terminated pursuant to this
Agreement."
(b) AMENDMENT TO SECTION 2.4. Section 2.4 of the Employment
Agreement shall be amended to read in its entirety as follows:
"2.4 Termination Without Cause. If the Corporation shall
elect to terminate Officer's employment without "cause" prior
to the expiration of the Employment Period (including prior to
the expiration of any extension period), then:
(a) The Corporation shall provide to Officer a Notice
of Termination (as defined in Section 3.4.4) setting forth the
reason for the termination of his employment, and Officer's
employment shall be terminated as of the date Officer receives
the Notice of Termination;
(b) The Corporation shall pay to Officer in a lump
sum in cash within 30 days after the Date of Termination (as
defined in Section 3.4.4) the aggregate of the following
amounts:
(i) To the extent not theretofore paid,
Officer's base salary through the Date of
Termination, at the rate in effect on the date the
Notice of Termination was given, along with any
earned but unpaid bonuses; and
(ii) In the case of compensation previously
deferred by Officer, all amounts of such compensation
previously deferred and not yet paid by the
Corporation; and
(iii) The greater of (A) one times Officer's
annual base salary at the rate in effect on the date
the Notice of Termination was given, or (B) the
aggregate amount of Officer's base salary, at the
rate in effect on the date the Notice of Termination
was given, that would be due through the end of the
Employment Period if the Notice of Termination had
not been given; and
(c) The Corporation shall, promptly upon submission
by Officer of supporting documentation, pay or reimburse to
Officer all costs and expenses paid or incurred by Officer
prior to the Date of Termination which would have been payable
under Section 3.3.2; and
(d) Officer's right to participate in the Incentive
Compensation Fund, referred to in Section 3.2 hereof, shall
immediately vest; and
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(e) For a period the longer of (i) one year from the
Date of Termination or (ii) the remainder of the Employment
Period if Notice of Termination had not been given, Officer
and his family shall be permitted to continue to participate
in all life, accidental death, disability, medical, dental and
other insurance plans of the Corporation. If, despite the
provisions of this Section 2.1(a), benefits shall not be
available under any of such plans because Officer is no longer
an employee of the Corporation, the Corporation itself shall,
to the extent necessary, pay or provide for payment of such
benefits to Officer and/or Officer's family, in each case at
the time such payments would be payable pursuant to the terms
of such plans.
However, Officer shall not accrue any further benefits other
than those required by law and will achieve vested status in
any other benefits offered by the Corporation under this
Agreement or any other benefit plan."
(c) AMENDMENT OF SECTION 2.7. Section 2.7 of the Employment
Agreement shall be amended to read in its entirety as follows:
"2.7. Termination Upon Expiration of Employment Period. If
the Corporation shall elect to terminate Officer's employment
hereunder upon the expiration of the Employment Period by
giving timely Notice of Termination to Officer, then, as of
the date of the expiration of the Employment Period
("Expiration Date"), Officer shall not accrue any further
benefits other than those required by law and shall not
achieve vested status in any other benefits offered by the
Corporation under this Agreement or any other benefit plan,
and the Corporation shall have no further obligation under
this Agreement, except as follows:
(a) The Corporation shall pay to Officer in a lump
sum in cash within 30 days after the Expiration Date the
aggregate of the following amounts:
(i) to the extent not theretofore paid,
Officer's base salary through the Expiration Date at
the rate then in effect, along with any earned but
unpaid bonuses; and
(ii) one times Officer's annual base salary
at the rate then in effect; and
(b) The Corporation shall, promptly upon submission
by Officer of supporting documentation, pay or reimburse to
Officer all costs and expenses paid or incurred by Officer
prior to the Expiration Date which are payable under Section
3.3.2; and
(c) For a period of one year from the Expiration
Date, Officer and his family shall be permitted to continue to
participate in all life, accidental death, disability,
medical, dental and other insurance plans of the Corporation
If, despite
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the provisions of this Section 2.7(c), benefits shall not be
available under any of such plans because Officer is no longer
an employee of the Corporation, the Corporation itself shall,
to the extent necessary, pay or provide for payment of such
benefits to Officer and/or Officer's family, in each case at
the time such payments would be payable pursuant to the terms
of such plans.
The payments and benefits, if any, required to be made or
provided to Officer by the Corporation pursuant to this
Section 2.7 shall be in full and complete in satisfaction of
all obligations of the Corporation owed to Officer pursuant to
this Agreement. After the Expiration Date, the Corporation
shall have no further obligations to Officer under this
Agreement except as expressly set forth herein."
(d) ADDITION OF SECTION 3.4. Following Section 3.3 of the
Employment Agreement, a new Section 3.4 shall be added to read
in its entirety as follows:
"3.4 Compensation Upon Termination of Employment Following a Change in
Control.
3.4.1 Amount of Compensation. If, during the Employment Period and
within three years of the date on which a "Change in Control" (as
defined in Section 3.4.2) occurs, the Corporation shall terminate
Officer's employment without "cause" (as defined in Section 2.2), or
the employment of Officer shall be terminated by Officer for "Good
Reason" (as defined in Section 3.4.3):
(a) The Corporation shall pay to Officer in a lump sum in
cash within 30 days after the Date of Termination the
aggregate of the following amounts:
(i) To the extent not theretofore paid, Officer's
base salary through the Date of Termination at the rate in
effect on the date the Notice of Termination was given along
with any earned but unpaid bonuses; and
(ii) Two (2) times Officer's annual base salary at
the rate in effect on the date the Notice of Termination was
given; and
(iii) In the case of compensation previously deferred
by Officer, all amounts of such compensation previously
deferred and not yet paid by the Corporation; and
(b) The Corporation shall, promptly upon submission by
Officer of supporting documentation, pay or reimburse to
Officer all costs and expenses paid or incurred by Officer
prior to the Date of Termination which would have been
payable under Section 3.3.2 if Officer's employment had not
terminated; and
(c) For a period of two years from the Date of Termination,
Officer shall continue to be treated as a key employee for
purposes of the employee benefit plans of the Corporation
described in Section 3.3 and the Corporation shall
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continue to provide benefits to or for the benefit of Officer
and/or Officer's family at least equal to those which would
have been provided or accrued, as the case may be, in
accordance with such plans if Officer's employment had not
been terminated. If, despite the provisions of this Section
3.4.1(c), benefits shall not be available under any of the
plans of the Corporation because Officer is no longer an
employee of the Corporation, then the Corporation itself
shall, to the extent necessary, pay or provide for payment of
benefits to Officer and/or Officer's family, or where
applicable, pay or provide to Officer and/or Officer's family
the difference between the benefits payable pursuant to this
Section 3.4.1(b) and the benefits actually payable pursuant to
the terms of such plans, in each case at the time such
payments would be payable pursuant to the terms of such plans,
programs and policies.
3.4.2 Definition of Change in Control. For the purpose of this
Agreement, a "Change in Control" shall be deemed to have occurred only
if:
(a) Any person or group (as such terms are used in Sections 13
(d) (3) and 14 (d) (2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") acquires the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act), directly or indirectly, of 50% or more of
the aggregate voting power of all classes of the Corporation's
then outstanding voting securities entitled to vote generally
in the election of directors of the Corporation; provided,
however, that the following acquisitions shall not constitute
a Change in Control: (i) any acquisition directly from the
Corporation (excluding an acquisition by virtue of the
exercise of a conversion privilege), (ii) any acquisition by
the Corporation or any subsidiary of the Corporation, or (iii)
any acquisition by any employee benefit plan (or related
trust) for employees or any subsidiary of the Corporation; or
(b) Individuals who, as of the date hereof, constitute the
Board of Directors of the Corporation (the "Board" generally,
and as of the date hereof, the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board,
provided that any person becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Corporation's stockholders, was approved by a vote of at least
two-thirds of the directors then comprising the Incumbent
Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an
actual or threatened election contest relating to the election
of the directors of the Corporation, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) shall be, for purposes of this Agreement, considered as
though such individual were a member of the Incumbent Board;
or
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(c) Approval by the Corporation of a reorganization, merger,
combination, or consolidation, in each case, unless, following
such reorganization, merger, combination, or consolidation,
(i) more than 50% of, respectively, the then outstanding
shares of common stock of the corporation or other entity
resulting from such reorganization, merger, combination or
consolidation and the aggregate voting power of the then
outstanding voting securities of the resulting corporation or
other entity entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly,
by all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the
outstanding Common Stock and outstanding voting securities of
the Corporation immediately prior to such reorganization,
merger, combination, or consolidation, in substantially the
same proportion as their ownership immediately prior to such
reorganization, merger, combination, or consolidation, and
(ii) at least a majority of the members of the board of
directors of the corporation or other entity resulting from
such reorganization, merger, combination or consolidation were
members of the Incumbent Board at the time of the execution of
the initial agreement providing for such reorganization,
merger, combination or consolidation; or
(d) Approval by the Corporation of the sale or other
disposition of all or substantially all of the assets of the
Corporation, other than to a corporation or other entity with
respect to which following such sale or other disposition the
conditions described in clauses (i) and (ii) of Section
3.4.2(c) are satisfied.
3.4.3 Definition of Good Reason. For purposes of this Agreement, "Good
Reason" means:
(a) (i) The assignment to Officer of any position, authority,
duties or responsibilities inconsistent in any respect with
Officer's position (including, without limitation, status,
offices, title and reporting requirements), authority, duties
or responsibilities, prior to the Change in Control, or (ii)
any other action by the Corporation which results in a
diminution in such position, authority, duties or
responsibilities, other than an insubstantial and inadvertent
action which is remedied by the Corporation promptly after
receipt of notice thereof given by Officer;
(b) Any reduction in Officer's base salary or in the extent of
Officer's entitlement to the employee benefits, expenses,
fringe benefits or perquisites referred to in Section 3;
(c) The Corporation's requiring Officer to be based at an
office location or to maintain his personal residence other
than in the greater Denver, Colorado area;
(d) The failure of the Corporation to obtain a satisfactory
agreement from any successor to the Corporation to assume and
agree to perform this Agreement;
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(e) The imposition on Officer of business travel obligations
substantially greater than his business travel obligations
during the fiscal year prior to the Change in Control;
(f) Any purported termination by the Corporation of Officer's
employment other than as expressly permitted by this
Agreement; or
(g) Any other failure by the Corporation to comply with any
provision of this Agreement, other than an insubstantial and
inadvertent failure which is remedied by the Corporation
promptly after receipt of notice thereof given by Officer.
3.4.4 Termination of Employment.
(a) Notice of Termination. Any termination by the Corporation
for any reason or by Officer for Good Reason, shall be
communicated by Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon,
(ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Officer's employment under the provision so indicated, and
(iii) if the Date of Termination is other than the date of
receipt of such notice, specifies the Date of Termination.
(b) Date of Termination. "Date of Termination", as used in
this Agreement, means the date Officer's employment with the
Corporation is terminated.
3.4.5 Supercedes Section 2. In the event of a Change in Control, the
provisions of this Section 3.4 shall supercede any provisions of
Section 2 that are inconsistent or in conflict with this Section 3.4."
SECTION 5. EFFECT OF AMENDMENT. From and after the date hereof, the
term "Employment Period" as used in the Employment Agreement shall be deemed to
refer to the Employment Period as such term is defined in this Amendment. Except
as and to the extent expressly modified by this Amendment, the Employment
Agreement shall remain in full force and effect in all respects in accordance
with its terms, and any reference to the Employment Agreement from and after the
date hereof shall be deemed to be a reference to the Employment Agreement as
modified by this Amendment.
SECTION 6. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of Colorado.
SECTION 7. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Amendment No. 2 to Employment Agreement has
been duly executed and delivered by or on behalf of the undersigned as of the
date first written above.
CORPORATION:
XXXXXX NATURAL GAS SERVICES, INC.
By: /s/ A. Xxxxxxx Xxxxxxx
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A. Xxxxxxx Xxxxxxx, Executive Vice President
OFFICER:
By: /s/ W. Xxxxxxx Xxxxxx
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W. Xxxxxxx Xxxxxx
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