CHANGE OF CONTROL AGREEMENT
EXHIBIT 10.19
THIS CHANGE OF CONTROL AGREEMENT (the “Agreement”), made and entered into effective as of
August 20, 2007 (the “Effective Date”), by and between Exterran Holdings, Inc., a Delaware
corporation (the “Company”), and (“Executive”).
WHEREAS, the Company and Executive desire to enter into an agreement regarding their
respective rights and obligations in connection with a Change of Control during the Term of this
Agreement;
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Company and Executive agree as follows:
1. Term. This Agreement shall begin on the Effective Date and shall continue until August 20,
2009; provided, however, that commencing on August 20, 2008 and on each August 20 thereafter, the
term of this Agreement shall automatically be extended for one additional year (such initial
period, plus any extensions, plus, in the event of Executive’s Qualifying Termination of Employment
for Good Reason, any additional time period necessitated by the Company’s right to cure as set
forth in the definition of “Good Reason,” the “Term”), unless at least 90 days prior to such August
20 date the Board shall give written notice to Executive that the Term of this Agreement shall
cease to be so extended. However, if a Change of Control shall occur during the Term, the Term
shall automatically continue in effect for a period of 18 months plus, in the event of Executive’s
Qualifying Termination of Employment for Good Reason, any additional time period necessitated by
the Company’s right to cure as set forth in the definition of “Good Reason,” commencing on the date
of such Change of Control. This Agreement shall automatically terminate on Executive’s termination
of employment, except as provided in the definition of “Protected Period.” Termination of this
Agreement shall not alter or impair any rights of Executive arising under this Agreement on or
prior to such termination.
2. Qualifying Termination of Employment. If Executive incurs a Qualifying Termination of
Employment, Executive shall be entitled to the benefits provided in Sections 3 and 4 hereof. If
Executive’s employment terminates for any reason other than for a Qualifying Termination of
Employment, then Executive shall not be entitled to any benefits under this Agreement.
3. Benefits Upon a Qualifying Termination of Employment.
(a) Lump Sum. Following a Qualifying Termination of Employment, the Company shall pay
to Executive, within five business days after the Date of Termination (or, if Code Section
409A is applicable to the payment, as soon as such payment can be made without being subject
to the additional taxes and interest under Code Section 409A), an amount, in a lump sum
payment, equal to the sum of:
(i) The total of (A) Executive’s earned but unpaid Base Salary through the Date
of Termination plus (B) Executive’s Target Bonus for the current year (prorated to
Date of Termination) plus (C) any earned but unpaid
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Actual Bonus for the prior year (if the prior year’s Actual Bonus has not yet
been calculated as of the Date of Termination such amount shall be payable when
calculated, but in no event later than March 15th of the year following the
Termination Year); plus
(ii) Any portion of Executive’s vacation pay accrued, but not used, for the
Termination Year as of the Date of Termination; plus
(iii) The product of [two/three] multiplied by the sum of Executive’s Base
Salary and Target Bonus amount for the Termination Year (not prorated); plus
(iv) An amount equal to the total of the employer matching contributions that
would have been credited to Executive’s account under the 401(k) Plan and any other
deferred compensation plan of the Company (or any of its affiliated companies) had
Executive made the required amount of elective deferrals or contributions to receive
such maximum employer matching contributions under the 401(k) Plan and any other
deferred compensation plan (and regardless of whether Executive actually made any
such elective deferrals or contributions) during the 12-month period immediately
preceding the month of Executive’s Date of Termination, multiplied by [two/three],
such amount to be grossed up so that the amount Executive actually receives after
payment of any federal or state taxes payable thereon equals the amount first
described above; plus
(iv) Amounts previously deferred by Executive, if any, or earned but not paid,
if any, under any Company incentive and nonqualified deferred compensation plans or
programs as of the Date of Termination.
(b) Continuing Medical Coverage. For a period of [two/three] years from Executive’s
Date of Termination, or such longer period as may be provided by the terms of the
appropriate medical and/or welfare benefit plan, program, practice or policy, the Company
shall provide benefits to Executive and/or Executive’s eligible dependents equal to those
that would have been provided to them in accordance with the plans, programs, practices and
policies if Executive’s employment had not been terminated; provided, however, that with
respect to any of such plans, programs, practices or policies requiring an employee
contribution, Executive shall continue to pay the monthly employee contribution for same,
and provided further, that if Executive becomes employed by another employer and is eligible
to receive medical or other welfare benefits under another employer-provided plan, the
medical and other welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility.
(c) Awards. All stock options, restricted stock, restricted stock units, or other
awards based in common stock of the Company, and all common units, unit appreciation rights,
unit options and other awards based in common units representing limited partner interests
of the Partnership, and all cash-based incentive awards held by Executive and
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not previously vested shall be 100% vested (except with respect to (i) an award that is
subject to Code Section 409A if such acceleration would result in the imposition of
applicable taxes and interest under Code Section 409A and (ii) awards denominated in or
relating to common units of the Partnership that, by their terms, continue to vest following
a termination of employment without cause or for good reason). Notwithstanding the terms of
any Company (or affiliate) plan or agreement between the Company (or affiliate) and
Executive to the contrary, the accelerated vesting of all stock options, restricted stock,
restricted stock units, or other awards required pursuant to the terms of this Section 3(c)
shall govern.
(d) Interest. If any payment due under the terms of this Agreement is not timely made
by the Company, its successors or assigns, interest shall accrue on such payment at the
highest maximum legal rate permissible under applicable law from the date such payment first
became due through the date it is paid.
(e) Release. Notwithstanding anything in this Agreement to the contrary, no payment
shall be made or benefits provided pursuant to this Agreement unless Executive signs and
returns to the Company within 50 days following the date of a Qualifying Termination of
Employment, and does not revoke within seven days thereafter, a complete release and waiver,
in exchange for the severance payments described in Section 3(a) above, among other items,
of all claims for liability and damages in any way related to Executive’s employment against
the Company, its affiliates, their directors, officers, employees and agents, and their
employee benefit plans and fiduciaries and agents of such plans in a form provided by the
Company.
(f) Severance Offset. Any cash severance payments provided under Section 3(a) shall be
offset or reduced by the amount of any cash severance amounts payable to Executive under any
other individual agreement the Company or an affiliate may have with Executive or any
severance plan or program maintained by the Company or any affiliate for employees in
general.
(g) Code Section 409A Matters.
(i) This Agreement is intended to comply with Code Section 409A and any
ambiguous provisions will be construed in a manner that is compliant with or exempt
from the application of Code Section 409A. If a provision of the Agreement would
result in the imposition of applicable taxes and interest under Code Section 409A,
such provision may be reformed to avoid imposition of such taxes and interest and no
action taken to comply with Code Section 409A shall be deemed to adversely affect
any rights or benefits of Executive hereunder.
(ii) All reimbursements and in-kind benefits provided pursuant to this
Agreement shall be made in accordance with Treasury Regulations Section
1.409A-3(i)(1)(iv) such that any reimbursements or in-kind benefits will be deemed
payable at a specified time or on a fixed schedule relative to a permissible payment
event. Specifically, (A) the amounts reimbursed and in-kind benefits under this
Agreement, other than with respect to medical benefits provided under
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Section 3(b), during Executive’s taxable year may not affect the amounts
reimbursed or in-kind benefits provided in any other taxable year, (B) the
reimbursement of an eligible expense shall be made on or before the last day of
Executive’s taxable year following the taxable year in which the expense was
incurred, and (C) the right to reimbursement or an in-kind benefit is not subject to
liquidation or exchange for another benefit.
(iii) If the Company determines, pursuant to policies adopted by the Board,
that Executive is a “specified employee” within the meaning of Code Section 409A as
of the date of his Date of Termination, no distributions or benefits that are
subject to Code Section 409A shall be made under this Agreement before the date that
is six months and two days after Executive’s Date of Termination (or, if earlier,
the date of Executive’s death). In addition, in the event of a payment delayed
under this Section 3(g)(iii), the Company agrees to pay to Executive, as of the date
it makes the delayed payment, simple interest on such delayed amount at the
applicable Federal rate provided for in Code Section 7872(f)(2)(A), based on the
number of days the payment was delayed. If Executive disagrees with the Company’s
determination that Code Section 409A requires such six-month delay with respect to a
payment or benefit, such payment or benefit can be made prior to such delayed
payment date if Executive agrees in writing (in the form approved by the Company)
that should the IRS subsequently assert that some or all of the payments or benefits
made pursuant to this Agreement do not comply with the requirements of Code Section
409A, then (i) Executive agrees that he is solely responsible for all taxes, excise
taxes, penalties and interest resulting from such determination, and that he will
not seek contribution, reimbursement or any other recovery from the Company or any
of its affiliates, officers, employees or directors for any taxes, excise taxes,
interest or penalties paid or due or any costs he incurs in challenging such
position of the IRS, and (ii) Executive will reimburse, and hold the Company, its
affiliates, officers, employees or directors harmless for, any costs, including
attorneys fees and costs of court, penalties or fees, that it may incur in
connection with a later determination that the payments made pursuant to this
Agreement are covered by Code Section 409A and were not properly reported as such.
4. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and except as set forth
below, in the event it shall be determined that any payment or distribution in the nature of
compensation (within the meaning of Code Section 280G(b)(2)) 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, but determined without regard to any additional
payments required under this Section 4) (a “Payment”) would be subject to the excise tax
imposed by Code Section 4999 or any interest or penalties are incurred by Executive with
respect to such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the “Excise Tax”), then Executive shall be
entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that
after payment by Executive of all taxes
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(including any interest or penalties imposed with respect to such taxes), including
without limitation, any income taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the
foregoing provisions of this Section 4(a), if it shall be determined that Executive is
entitled to a Gross-Up Payment, but that Executive, after taking into account the Payments
and the Gross-Up Payment, would not receive a net after-tax benefit of at least $1,000
(taking into account both income taxes and any Excise Tax) as compared to the net after-tax
proceeds to Executive resulting from an elimination of the Gross-Up Payment and a reduction
of the Payments, in the aggregate, to an amount (the “Reduced Amount”) such that the receipt
of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to
Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 4(c), all determinations required to be made
under this Section 4, including 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 Deloitte & Touche LLP or, as provided below, such other
certified public accounting firm as may be designated by Executive (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and Executive
within 15 business days after the receipt of notice from Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 4, shall be paid by the Company to Executive within five days after
the receipt of the Accounting Firm’s determination. Any determination by the Accounting
Firm shall be binding upon the Company and Executive. As a result of the uncertainty in the
application of Code Section 4999 at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the
Company should have been made (“Underpayment”), consistent with the calculations required to
be made hereunder. In the event that the Company exhausts its remedies pursuant to Section
4(c) and Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred and any
such Underpayment shall be promptly paid by the Company to or for the benefit of Executive.
(c) Executive shall notify the Company in writing of any claim by the IRS that, if
successful, would require the payment by the Company of the Gross-Up Payment (or an
additional Gross-Up Payment) in the event the IRS seeks higher payment. Such notification
shall be given as soon as practicable, but no later than ten business days after Executive
is informed in writing of such claim, and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on
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which he gives such notice to the Company (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the Company notifies
Executive in writing prior to the expiration of such period that it desires to contest such
claim, Executive shall:
(i) Give the Company any information reasonably requested by the Company
relating to such claim;
(ii) Take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including without limitation,
accepting legal representation with respect to such claim by an attorney reasonably
selected by the Company;
(iii) Cooperate with the Company in good faith in order to effectively contest
such claim; and
(iv) Permit the Company to participate in any proceedings relating to such
claim;
provided, however, that the Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with such costs 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
such representation and payment of costs and expenses. Without limitation of the foregoing
provisions of this Section 4(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct Executive to pay the tax
claimed and xxx for a refund or contest the claim in any permissible manner, and Executive
agrees to prosecute such contest to determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs Executive to pay such claim and
xxx for a refund, the Company shall provide the amount of such payment to Executive as an
additional payment (“Supplemental Payment”) (subject to Section 4(d)), and shall indemnify
and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to such payment
or with respect to any imputed income with respect to such payment; and further provided
that any extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company’s control of the
contest shall be limited to issues with respect to which a Gross-Up Payment or Supplemental
Payment would be payable hereunder and Executive shall be entitled to settle or contest, as
the case may be, any other issues raised by the IRS or any other taxing authority.
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(d) If, after the receipt by Executive of an amount advanced by the Company pursuant to
Section 4(c), Executive becomes entitled to receive any refund with respect to such claim,
Executive shall (subject to the Company’s complying with the requirements of Section 4(c))
promptly pay to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto).
(e) If the amount of medical benefits provided under Section 3(b) or the value of such
benefit coverage (including, without limitation, any insurance premiums paid by the Company
to provide such benefits) is subject to any income, employment or similar tax imposed by
federal, state or local law, or any interest or penalties with respect to such tax (such tax
or taxes, together with any such interest and penalties, being hereafter collectively
referred to as the “Income Tax”) because such benefits cannot be provided under a
nondiscriminatory health plan described in Section 105 of the Code or for any other reason,
the Company will pay to Executive an additional payment or payments (collectively, an
“Income Tax Payment”). The Income Tax Payment will be in an amount such that, after payment
by Executive of all taxes (including any interest or penalties imposed with respect to such
taxes), Executive retains an amount of the Income Tax Payment equal to the Income Tax
imposed with respect to such welfare benefits or such welfare benefit coverage.
5. Restrictions and Obligations of Executive.
(a) Consideration for Restrictions and Covenants. The Company and Executive agree that
the principal consideration for the agreement to make the payments provided in this
Agreement by the Company to Executive is Executive’s compliance with the undertakings set
forth in this Section 5. Notwithstanding any other provision of this Agreement to the
contrary, Executive agrees to comply with the provisions of this Section 5 only if Executive
actually receives any such payments from the Company pursuant to this Agreement.
(b) Confidentiality. Executive acknowledges that the Company will provide Executive
with Confidential Information and has previously provided Executive with Confidential
Information. In return for consideration provided under this Agreement, Executive agrees
that Executive will not, while employed by the Company or any affiliate and thereafter for a
period of two years, disclose or make available to any other person or entity, or use for
Executive’s own personal gain, any Confidential Information, except for such disclosures as
required in the performance of Executive’s duties with the Company or as may otherwise be
required by law or legal process (in which case Executive shall notify the Company of such
legal or judicial proceeding as soon as practicable following his receipt of notice of such
a proceeding, and permit the Company to seek to protect its interests and information).
(c) Non-Solicitation or Hire. During the term of Executive’s employment with the
Company or any affiliate thereof and for a [two/three]-year period following the termination
of Executive’s employment for any reason, Executive shall not, directly or indirectly (i)
employ or seek to employ any person who is at the date of termination, or was at any time
within the six-month period preceding the date of termination, an officer,
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general manager or director or equivalent or more senior level employee of the Company
or any of its subsidiaries or otherwise solicit, encourage, cause or induce any such
employee of the Company or any of its subsidiaries to terminate such employee’s employment
with the Company or such subsidiary for the employment of another company (including for
this purpose the contracting with any person who was an independent contractor (excluding
consultant) of the Company during such period) or (ii) take any action that would interfere
with the relationship of the Company or its subsidiaries with their suppliers or customers
without, in either case, the prior written consent of the Company’s Board of Directors, or
engage in any other action or business that would have a material adverse effect on the
Company.
(d) Non-Competition. During the term of Executive’s employment with the Company, or
any affiliate thereof and for a [two/three]-year period following the termination of
Executive’s employment for any reason, Executive shall not, directly or indirectly:
(i) Engage in any managerial, administrative, advisory, consulting, operational
or sales activities in a Restricted Business anywhere in the Restricted Area,
including, without limitation, as a director or partner of such Restricted Business,
or
(ii) Organize, establish, operate, own, manage, control or have a direct or
indirect investment or ownership interest in a Restricted Business or in any
corporation, partnership (limited or general), limited liability company, enterprise
or other business entity that engages in a Restricted Business anywhere in the
Restricted Area.
Nothing contained in this Section 5 shall prohibit or otherwise restrict Executive from
acquiring or owning, directly or indirectly, for passive investment purposes not intended to
circumvent this Agreement, securities of any entity engaged, directly or indirectly, in a
Restricted Business if either (i) such entity is a public entity and Executive (A) is not a
controlling Person of, or a member of a group that controls, such entity and (B) owns,
directly or indirectly, no more than 3% of any class of equity securities of such entity or
(ii) such entity is not a public entity and Executive (A) is not a controlling Person of, or
a member of a group that controls, such entity and (B) does not own, directly or indirectly,
more than 1% of any class of equity securities of such entity.
(e) Injunctive Relief. Executive acknowledges that monetary damages for any breach of
Section 5(b), (c), and (d) above will not be an adequate remedy and that irreparable injury
will result to the Company, its business and property, in the event of such a breach. For
that reason, Executive agrees that in the event of a breach, in addition to recovering legal
damages, the Company is entitled to proceed in equity for specific performance or to enjoin
Executive from violating such provisions.
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6. Miscellaneous Provisions.
(a) Definitions Incorporated by Reference. Reference is made to Annex I hereto for
definitions of certain capitalized terms used in this Agreement, and such definitions are
incorporated herein by such reference with the same effect as if set forth herein.
(b) No Other Mitigation or Offset; Legal Fees. The provisions of this Agreement are
not intended to, nor shall they be construed to, require that Executive mitigate the amount
of any payment or benefit provided for in this Agreement by seeking or accepting other
employment. Except as provided in Section 3(b), the amount of any payment or benefit
provided for in this Agreement shall not be reduced by any compensation earned or health
benefits received by Executive as the result of employment outside of the Company. Without
limitation of the foregoing, except as provided in Section 3(f), the Company’s obligations
to Executive under this Agreement shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, right or action that the Company may have against
Executive. The Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses Executive may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company or Executive of the validity or
enforceability of, or liability under, any provision of this Agreement other than Section 5
or any guarantee of performance thereto (including as a result of any contest by Executive
about the amount of any payment pursuant to this Agreement), plus in each case interest on
any delayed payment at the applicable Federal rate provided for in Code Section
7872(f)(2)(A).
(c) Cooperation. If Executive becomes entitled to severance benefits under Section 3
of this Agreement, Executive agrees, for a one-year period following the Date of
Termination, to provide reasonable cooperation to the Company in response to reasonable
requests made by the Company for information or assistance, including but not limited to,
participating upon reasonable notice in conferences and meetings, providing documents or
information, aiding in the analysis of documents, or complying with any other reasonable
requests by the Company including execution of any agreements that are reasonably necessary,
provided such cooperation relates to matters concerning Executive’s duties with the Company
and the requests do not, in the good faith opinion of Executive, materially interfere with
Executive’s other activities.
(d) Successors; Binding Agreement.
(i) Except in the case of a merger involving the Company with respect to which
under applicable law the surviving corporation of such merger will be obligated
under this Agreement in the same manner and to the same extent as the Company would
have been required if no such merger had taken place, the Company will require any
successor, by purchase or otherwise, to all or substantially all of the business
and/or assets of the Company, to execute an agreement whereby such successor
expressly assumes and agrees to perform this Agreement in the same manner and to the
same extent as the Company would have been required if no such succession had taken
place and expressly agrees
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that Executive may enforce this Agreement against such successor. Failure of
the Company to obtain any such required agreement and to deliver such agreement to
Executive prior to the effectiveness of any such succession shall be a breach of
this Agreement and shall entitle Executive to payment from the Company in the same
amount and on the same terms as Executive would be entitled hereunder if Executive
had terminated Executive’s employment for Good Reason in connection with a Change of
Control, except that for purposes of implementing the foregoing, the date on which
any such succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this Section 6(d)(i) or which otherwise becomes bound
by all the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be enforceable by
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If Executive should die
while any amounts would still be payable to Executive hereunder if Executive had
continued to live, all such amounts shall be paid in accordance with the terms of
this Agreement to Executive’s beneficiary as filed with the Company pursuant to this
Agreement or, if there be no such designated beneficiary, to Executive’s estate.
(e) Notice. All notices, consents, waivers, and other communications required under
this Agreement must be in writing and will be deemed to have been duly given when (i)
delivered by hand (with written confirmation of receipt), (ii) sent by facsimile (with
confirmation of receipt), provided that a copy is mailed by certified mail, return receipt
requested, or (iii) when received by the addressee, if sent by a nationally recognized
overnight delivery service, in each case to the appropriate addresses and facsimile numbers
set forth below (or to such other addresses and facsimile numbers as a party may designate
by notice to the other parties):
If to the Company:
| Exterran Holdings, Inc. | ||||
| 0000 Xxxxxxxxxx Xxxx | ||||
| Xxxxxxx, Xxxxx 00000 | ||||
| Attn: Chairman of the Board of Directors | ||||
| Facsimile No.: 713- | ||||
| If to Executive: | ||||
| [ ] | ||||
| [ ] | ||||
| [ ] |
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(f) Miscellaneous. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing signed by
Executive and by the Chairman of the Board or an authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time.
(g) Validity. The interpretation, construction and performance of this Agreement shall
be governed by and construed and enforced in accordance with the laws of the State of Texas
without regard to conflicts of laws principles. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, each of which shall remain in full force and effect.
(h) 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 shall constitute one and
the same instrument.
(i) Descriptive Headings. Descriptive headings are for convenience only and shall not
control or affect the meaning or construction of any provision of this Agreement.
(j) Corporate Approval. This Agreement has been approved by the Board, and has been
duly executed and delivered by Executive and on behalf of the Company by its duly authorized
representative.
(k) Disputes. The parties agree to resolve any claim or controversy arising out of or
relating to this Agreement by binding arbitration under the Federal Arbitration Act before
one arbitrator in the City of Houston, State of Texas, administered by the American
Arbitration Association under its Commercial Arbitration Rules, and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction thereof. The
Company shall reimburse Executive, on a current basis, for all legal fees and expenses
incurred by Executive in connection with any dispute arising under this Agreement,
including, without limitation, the fees and expenses of the arbitrator, unless the
arbitrator finds Executive brought such claim in bad faith, in which event each party shall
pay its own costs and expenses and Executive shall repay to the Company any fees and
expenses previously paid on Executive’s behalf by the Company.
The parties stipulate that the provisions hereof shall be a complete defense to any
suit, action, or proceeding instituted in any federal, state, or local court or before any
administrative tribunal with respect to any controversy or dispute arising during the period
of this Agreement and which is arbitrable as herein set forth. The arbitration provisions
hereof shall, with respect to such controversy or dispute, survive the termination of this
Agreement.
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(l) Withholding of Taxes. The Company may withhold from any amounts payable under this
Agreement all taxes it is required to withhold pursuant to any applicable law or regulation.
(m) No Employment Agreement. Nothing in this Agreement shall give Executive any rights
to (or impose any obligations for) continued employment by the Company or any of its
affiliates or any successors, nor shall it give the Company any rights (or impose any
obligations) with respect to continued performance of duties by Executive for the Company or
any of its affiliates or any successors.
(n) Entire Agreement. This instrument contains the entire agreement of Executive and
the Company with respect to the subject matter hereof, and hereby expressly terminates,
rescinds and replaces in full any prior and contemporaneous promises, representations,
understandings, arrangements and agreements between the parties relating to the subject
matter hereof, whether written or oral, except that any existing change of control or
similar agreement between Executive and Hanover Compressor Company, Universal Compression
Holdings, Inc. or any of their respective affiliates shall continue in full force and effect
according to its terms with respect to the Merger. However, nothing in this Agreement shall
affect Executive’s rights under such compensation and benefit plans and programs of the
Company in which Executive may participate, except as may be explicitly provided in this
Agreement.
IN WITNESS WHEREOF, the Company and Executive have executed this Agreement in multiple
counterparts effective for all purposes as of the Effective Date.
| EXTERRAN HOLDINGS, INC. | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| EXECUTIVE | ||||
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Definitions:
| 1. | 401(k) Plan. “401(k) Plan” shall mean the Company’s 401(k) Retirement and Savings Plan or any successor plan and any other Code Section 401(a) qualified plan that includes a cash or deferral arrangement under Code Section 401(k). | |
| 2. | Actual Bonus. “Actual Bonus” shall mean the specific annual incentive award approved for Executive by the Board in the case of the Section 16 officers of the Company or approved by the Chief Executive Officer for non-Section 16 officers of the Company. | |
| 3. | Base Salary. “Base Salary” shall mean an Executive’s annual rate of base salary (without regard to bonus compensation) as in effect immediately prior to the Change of Control or as the same may be increased from time to time thereafter. | |
| 4. | Board. “Board” shall mean the Board of Directors of the Company. | |
| 5. | Cause. The Company shall have “Cause” to terminate Executive’s employment only upon (a) the commission by Executive of an act of fraud, embezzlement or willful breach of a fiduciary duty to the Company or an affiliate (including the unauthorized disclosure of confidential or proprietary material information of the Company or an affiliate), (b) a conviction of Executive (or a plea of nolo contendere in lieu thereof) for a felony or a crime involving fraud, dishonesty or moral turpitude, (c) willful failure of Executive to follow the written directions of the Board; (d) willful misconduct by Executive as an employee of the Company or an affiliate; (e) the willful failure of Executive to render services to the Company or an affiliate in accordance with Executive’s employment arrangement, which failure amounts to a material neglect of Executive’s duties to the Company or an affiliate; or (f) Executive’s substantial dependence, as determined in the sole discretion of the Board, on any drug, immediate precursor or other substance listed on Schedule IV of the Federal Comprehensive Drug Abuse Prevention and Control Act of 1970, as amended. | |
| 6. | Change of Control. A “Change of Control” of the Company shall mean: |
| (a) | The acquisition by any Person of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of either (A) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (i), any acquisition by any Person pursuant to a transaction which complies with clause (A) of subsection (c) of this definition shall not constitute a Change of Control; or |
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| (b) | Individuals, who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered for purposes of this definition as though such individual was a member of the Incumbent Board, but excluding, for these purposes, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or | ||
| (c) | The consummation of a reorganization, merger or consolidation involving the Company or any of its subsidiaries, or the sale, lease or other disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole (other than to an entity wholly owned, directly or indirectly, by the Company) (each, a “Corporate Transaction”), in each case, unless, following such Corporate Transaction, (A) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the Resulting Corporation in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction, of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, and (B) at least a majority of the members of the board of directors of the Resulting Corporation were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Corporate Transaction. The term “Resulting Corporation” means (1) the Company or its successor, or (2) if as a result of a Corporate Transaction the Company or its successor becomes a subsidiary of another entity, then such entity or the parent of such entity, as applicable, or (3) in the event of a Corporate Transaction involving the sale, lease or other disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, then the transferee of such assets or the parent of such transferee, as applicable, in such Corporate Transaction. Notwithstanding the foregoing, neither the sale, lease or other disposition of assets by the Company or its subsidiaries to the Partnership or its subsidiaries or their successors nor the sale, lease or other disposition of any interest in the Partnership, its general partner or its subsidiaries or their successors shall, in and of itself, constitute a Change of Control for purposes of this Agreement. |
| Notwithstanding anything to the contrary contained in this Agreement, the Merger shall not constitute a Change of Control for purposes of this Agreement. |
| 7. | Code. “Code” shall mean the Internal Revenue Code of 1986, as amended. |
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| 8. | Confidential Information. “Confidential Information” shall mean any and all information, data and knowledge that has been created, discovered, developed or otherwise become known to the Company or any of its affiliates or ventures or in which property rights have been assigned or otherwise conveyed to the Company or any of its affiliates or ventures, which information, data or knowledge has commercial value in the business in which the Company is engaged, except such information, data or knowledge as is or becomes known to the public without violation of the terms of this Agreement. | |
| 9. | Date of Termination. “Date of Termination” shall mean (a) if Executive terminates his employment for Good Reason, that date provided in the definition of Good Reason, (b) with respect to a termination prior to a Change of Control that is deemed to be during the Protected Period (as provided in said definition), the date of such termination, or (c) if Executive’s employment is terminated for any other reason on or after a Change of Control, the date of such termination, and, in the case of each of clauses (a), (b) and (c) above, such termination is also a “separation from service” within the meaning of Code Section 409A. | |
| 10. | Disability. A “Disability” means Executive is entitled to long-term disability benefits under the Company’s long-term disability plan. | |
| 11. | Exchange Act. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. | |
| 12. | Good Reason. “Good Reason” shall mean the occurrence of any of the following without Executive’s express written consent: |
| (a) | A permanent change in Executive’s duties or responsibilities which are materially inconsistent with either the type of duties and responsibilities of Executive then in effect or with Executive’s title, but excluding any such change that is in conjunction with and consistent with a promotion of Executive; | ||
| (b) | A reduction in Executive’s Base Salary. | ||
| (c) | A reduction in Executive’s annual Target Bonus percentage of Base Salary as in effect immediately prior to the Change of Control; | ||
| (d) | A material reduction in Executive’s employee benefits (without regard to bonus compensation, if any) if such reduction results in Executive receiving benefits which are, in the aggregate, materially less than the benefits received by other comparable employees of the Company generally; | ||
| (e) | Executive’s being required to be based at any other office or location of employment more than 50 miles from Executive’s primary office or location of employment immediately prior to the Change of Control; or | ||
| (f) | The willful failure by the Company to pay any compensation to Executive when due. |
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| However, Good Reason shall not exist with respect to a matter unless Executive gives the Company a Notice of Termination due to such matter within 18 months of the date of occurrence of the Change of Control. If Executive fails to give such Notice of Termination timely, Executive shall be deemed to have waived all rights Executive may have under this Agreement with respect to such matter. The Company shall have 30 business days from the date of such Notice of Termination to cure the matter. If the Company cures the matter, such Notice of Termination shall be deemed rescinded. If the Company fails to cure the matter timely, Executive shall be deemed to have terminated at the end of such 30-day period. |
| 13. | IRS. “IRS” shall mean the Internal Revenue Service. | |
| 14. | Merger. “Merger” shall mean the consummation of the transactions contemplated by that certain Agreement and Plan of Merger, dated as of February 5, 2007, as amended, by and among Universal Compression Holdings, Inc., Hanover Compressor Company, Exterran Holdings, Inc., Xxxxxxx Sub, Inc. and Xxxxxx Sub, Inc. | |
| 15. | Notice of Termination. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice that sets forth in reasonable detail the facts and circumstances for termination of Executive’s employment. | |
| 16. | Partnership. “Partnership” shall mean Exterran Partners, L.P. (formerly named Universal Compression Partners, L.P.). | |
| 17. | Person. “Person” shall mean any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act. | |
| 18. | Protected Period. The “Protected Period” shall mean the period of time beginning with the Change of Control and ending on the 18-month anniversary of such Change of Control or Executive’s death, if earlier; provided, however, if Executive’s employment with the Company is terminated during the Term and within six months prior to the date on which a Change of Control occurs (e.g., not during the Protected Period), and it is reasonably demonstrated by Executive that such termination was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control, or otherwise arose in connection with or anticipation of the Change of Control, then for all purposes of this Agreement the Change of Control shall be deemed to have occurred on the date immediately prior to the date of Executive’s termination and Executive shall be deemed terminated by the Company during the Protected Period other than for Cause | |
| 19. | Qualifying Termination of Employment. A “Qualifying Termination of Employment” shall mean a termination of Executive’s employment during the Protected Period either (a) by the Company other than for Cause or (b) by Executive for a Good Reason. The Executive’s death or Disability during the Protected Period shall not constitute a Qualifying Termination of Employment. |
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| 20. | Restricted Area. “Restricted Area” shall mean any state in the United States, or any country in which the Company or its subsidiaries engages in any Restricted Business at any time during the term of Executive’s employment with the Company. | |
| 21. | Restricted Business. “Restricted Business” shall mean the business of designing, manufacturing, servicing, operating, marketing, assembling, renting or leasing of air or gas compressors or devices using comparable technologies or other business in which the Company or its subsidiaries may be engaged during the term of Executive’s employment with the Company. To the extent that any entity is primarily engaged in a business other than a Restricted Business, the term “Restricted Business” shall mean the operations, division, segment or subsidiary of such entity that is engaged in any Restricted Business. | |
| 22. | Target Bonus. “Target Bonus” shall mean the target annual incentive award opportunity for an Executive expressed as a percentage of salary as set forth in the annual management incentive plan covering such Executive. | |
| 23. | Term. “Term” shall have the meaning set forth in Section 1 of this Agreement. | |
| 24. | Termination Year. “Termination Year” shall mean the calendar year during which Executive’s Date of Termination occurs. |
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