AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (as from time to time
amended in accordance with the provisions hereof, this "Agreement"), is
entered into this 1st day of July 1999 by and between XXXXXXX X. XXXX,
residing at 0000 Xxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxxx 00000 (the "Executive")
and KEY ENERGY SERVICES, INC., a Maryland corporation with its principal
offices at Xxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
(the "Company").
RECITALS
A. The Company and the Executive have previously entered into that certain
Employment Agreement dated as of July 1, 1995 (the "1995 Employment
Agreement") pursuant to which the Executive currently serves as Chairman of
the Board, President and Chief Executive Officer of the Company.
B. In recognition of the fact that the members of the Board of Directors of
the Company (other than the Executive) are of the view that retaining the
services of the Executive in his capacities as Chairman of the Board,
President and Chief Executive Officer of the Company is essential to the
continued growth and success of the Company and is in the best interests of
the Company and its shareholders, the Company desires to amend and restate
the 1995 Employment Agreement and continue to retain the services of the
Executive as Chairman of the Board, President and Chief Executive Officer of
the Company pursuant to the terms and conditions hereinafter set forth
effective as of July 1, 1999 (the "Commencement Date").
C. The Executive is willing to amend and restate the 1995 Employment
Agreement and to continue to serve in such capacities pursuant to the terms
and conditions hereinafter set forth effective as of the Commencement Date.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the Company and the Executive hereby agree as follows:
1. EMPLOYMENT; TERM.
(a) Effective as of the Commencement Date, the 1995 Employment Agreement
shall be terminated and of no further force or effect except for the
Company's obligations (i) to make any payments to the Executive under Section
2 thereof for services rendered and expenses incurred prior to the
Commencement Date and (ii) pertaining to the options previously granted to
the Executive identified in Schedule A hereto. The Company hereby agrees to
employ the Executive, and the Executive hereby accepts employment by the
Company, as the Company's Chairman of the Board, President and Chief
Executive Officer, such employment to commence as of July 1, 1999 (the
"Commencement Date"),
and to continue until the close of business on June 30, 2004, subject to
extension as provided in this Section l(a), unless sooner terminated in
accordance herewith (the "Initial Employment Period"). On each June 30,
commencing with June 30, 2000, the term of the Executive's employment
hereunder shall be automatically extended for twelve (12) months unless
either he or the Company shall have given written notice to the other that
such automatic extension shall not occur, which notice shall have been given
no later than thirty (30) days prior to the relevant June 30th (the Initial
Employment Period, together with any extensions, until termination in
accordance herewith, is referred to herein as the "Employment Period").
(b) The Company also hereby agrees that the Executive currently serves
as a director on the Board of Directors of the Company (the "Board"), and as
a director and either the President or Chairman of the Board of Directors of
each Subsidiary(as defined in Section 17 hereof), and the Executive hereby
accepts such appointments.
(c) The Executive shall have the responsibilities, duties and authority
commensurate with his positions as the Chairman of the Board, President and
Chief Executive Officer of the Company, including, without limitation, the
general supervision and control over, and responsibility for, the general
management and operation of the Company and its Subsidiaries, subject,
however, to the supervision of the Board insofar as such supervision is
required by the Maryland General Corporation Law, and the Company's Articles
of Incorporation and By-Laws. Such responsibilities, duties and authority
shall not be expanded or contracted without the express consent of the
Executive. The Executive will report only to the Board.
(d) The Executive will devote his full time and his best efforts to the
business and affairs of the Company and its subsidiaries; PROVIDED, HOWEVER,
that nothing contained in this Section 1 shall be deemed to prevent or limit
the Executive's right to: (i) make investments in the securities of any
publicly-owned corporation; or (ii) make any other investments with respect
to which he is not obligated or required to, and to which he does not in
fact, devote substantial managerial efforts which materially interfere with
his fulfillment of his duties hereunder; or (iii) to continue to serve on
boards of directors on which he currently serves and to serve in such other
positions with non-profit and for-profit organizations as to which the Board
may from time to time consent, which consent shall not be unreasonably
withheld or delayed.
(e) The principal location at which the Executive will perform his
duties will be the Company's principal offices. The Company's principal
offices may be transferred by the Executive or by the Board, with the
Executive's consent. In the event of such a transfer, the Company will pay
moving, temporary living and other reasonable expenses in connection with the
Executive's relocation from his present primary residence to a location in
proximity to the Company's principal offices.
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2. SALARY; BONUSES; EXPENSES.
(a) During the Employment Period, the Company will pay a salary to the
Executive at the annual rate of Five Hundred Seventy-Five Thousand Dollars
($575,000) per year (the "Base Salary"), payable in substantially equal
installments in accordance with the Company's existing payroll practices, but
no less frequently than biweekly. The Company will review the Executive's
Base Salary on a yearly basis promptly following the end of each fiscal year
of the Company to determine if an increase is advisable, and the Base Salary
may be increased but not decreased at the discretion of the Board or the
Compensation Committee, taking into account, among other factors, the
Executive's performance and the performance of the Company.
(b) For each annual period commencing July 1, 1999, the Executive shall
be eligible to participate in the Company's Performance Compensation Plan
(the "Performance Compensation Plan") for the Company's executives providing
for the payment of cash bonuses, which plan will provide for the payment of
bonuses based upon the achievement of goals set forth in the Company's
strategic plan as developed by the Executive and the Board or the
Compensation Committee, as the case may be (the "Strategic Plan"), payable
within ninety (90) days after the end of each fiscal year. The performance
goals for the Performance Compensation Plan will be based on objective
criteria mutually negotiated and agreed upon in good faith in advance by the
Executive and the Board. The Executive's annual bonus determined in
accordance with this Section 2(b) is referred to herein as the "Annual Bonus."
(c) The Executive shall also receive such bonuses other than pursuant to
the Performance Compensation Plan in such amounts and at such times as the
Board or the Compensation Committee, as the case may be, in its discretion
determines are appropriate to recognize extraordinary performance by the
Executive or the Company, which would include, without limitation, (i) the
acquisition of the stock or assets, or the merger or consolidation with or
into another company or other entity; (ii) the acquisition or sale of a
division or divisions of the Company; or (iii) the acquisition or sale of a
Subsidiary or Subsidiaries, or of the Company.
(d) The Executive is authorized to incur and shall be reimbursed by the
Company for all reasonable expenses, including, but not limited to travel,
lodging, meal and other expenses as determined by him in his sole discretion,
incurred by him in carrying out his duties hereunder. All air travel by the
Executive may be in first class. Any bonus mileage will be returned to the
Company for the Company's use. In addition, it is the Company's desire for
security and other safety related issues that the Executive, in his sole
discretion have the authority to lease or otherwise contract for the services
of a private aircraft for business related travel.
3. STOCK OPTIONS.
(a) The Company acknowledges that the Executive has previously
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been awarded stock options that are either fully vested or not fully vested,
as the case may be, as identified in Schedule A and the Company reaffirms
herein its contractual commitments in those agreements. Except as otherwise
modified by the terms of this Agreement, the terms of the stock option
agreements pertaining to the stock options identified in Schedule A shall
continue to apply and be construed so as not to change or modify any rights
of the Executive set forth therein.
(b) For each annual period commencing July 1, 1999, the Executive shall
be eligible to participate in a stock option plan for the Company's
executives providing for the granting of stock options under the Company's
1997 Incentive Plan (the "1997 Incentive Plan"). The performance goals for
the grant of such options will be based on objective criteria mutually
negotiated and agreed upon in good faith in advance by the Executive and the
Board. The Executive's aggregate annual bonus determined in accordance with
this Section 3(b) is referred to herein as the "Annual Stock Option Grant."
(c) The Company agrees that it will use its best efforts to comply with
the requirements of Rule 16b-3 promulgated pursuant to the Securities
Exchange Act of 1934, as amended (the "1934 Act"), as such rule shall be in
effect from time to time, or with any successor provision to said rule("Rule
16b-3") such that in the event the Executive shall become subject to Section
16 (or a successor provision) of the 1934 Act with respect to shares of the
Company's capital stock, the Executive shall be afforded the benefits of Rule
16b-3 with respect to such restricted stock or options, including without
limitation providing for the grant of restricted stock or options pursuant to
stock plans which comply with Rule 16b-3 and permit the terms of options
contemplated by this Agreement.
(d) The Company agrees, so long as the Company shall be subject to the
reporting requirements of Section 13 or 15(d) (or any successor provision) of
the 1934 Act (referred to herein as "1934 Act Registration"), it shall use
its best efforts to cause to remain effective a registration statement on
Form S-8 (or a successor form) within ninety (90) days of the date such 1934
Act Registration becomes effective, and to maintain the effectiveness of such
registration statement, such that any restricted stock or options granted to
the Executive and the purchase of shares by the Executive (or his assignee)
upon the exercise of any such options shall be registered under the
Securities Act of 1933, as amended or any successor provision, and so long as
he is an affiliate of the Company or if he (or his assignee) shall have
exercised any of such options in whole or in part prior to the effectiveness
of such registration statement, to provide for and maintain the effectiveness
of a corresponding resale prospectus on Form S-3 providing for the resale by
the Executive (or his assignee)of the shares so granted or purchased.
4. BENEFIT PLANS; VACATIONS. In connection with the Executive's employment
hereunder, he shall be entitled during the Employment Term (and thereafter to
the extent provided in Section 5(f) hereof) to the following additional
benefits:
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(a) At the Company's expense, such fringe benefits, including, without
limitation, group medical and dental, life, executive life, accident and
disability insurance and retirement plans and supplemental and excess
retirement benefits, as the Company may provide from time to time for its
senior management, but, in any case, at least the benefits described on
SCHEDULE B hereto.
(b) The Executive shall be entitled to no less than the number of
vacation days in each calendar year determined in accordance with the
Company's vacation policy as in effect from time to time, but not less than
four (4) weeks in any calendar year (prorated in any calendar year during
which he is employed hereunder for less than the entire year in accordance
with the number of days in such calendar year in which he is so employed).
The Executive shall also be entitled to all paid holidays and personal days
given by the Company to its executives.
(c) The Company shall lease an automobile for the Executive
substantially similar to the automobile currently leased for the Executive
and shall pay all expenses, including but not limited to insurance, repair
and maintenance, incurred by the Executive in connection with the use of the
automobile during the Employment Term as well as a driver trained in security
techniques if needed for his use. In addition, it is the Company's desire
that the Executive have the authority, in his sole discretion, to contract
for the services of a car and driver for security and safety reasons for
business and/or personal use and to be at his disposal 24 hours a day, 7 days
a week.
(d) The Company will pay the reasonable fees for personal (i) financial
advisory, counseling, accounting and related services; (ii) legal advisory or
attorneys' fees and related expenses; and (iii) income tax return preparation
and tax audit services as reasonably requested by the Executive, provided by
certified public accountants and tax attorneys acceptable to him.
(e) The Company shall pay the reasonable expenses of a home office for
the Executive. It is also the Company's desire that the Executive be entitled
to establish Company paid offices for his use at or near locations in which
he may be staying for periods in excess of twenty-four (24) hours and that
the Executive shall be entitled to employ at the Company's expense such
number of administrative assistants at appropriate compensation levels as are
considered necessary by him. In addition, the Company will provide to the
Executive with a security system or security coverage at the job location, at
his residence or otherwise, if reasonably requested by the Executive.
(f) Nothing herein contained shall preclude the Executive, to the extent
he is otherwise eligible, from participation in all group insurance programs
or other fringe benefit plans which the Company may from time to time in its
sole and absolute discretion make available generally to its personnel, or
for personnel similarly situated, but the Company shall not be required to
establish or maintain any such program or plan except as may be otherwise
expressly provided herein.
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(g) The Company shall pay all membership costs, including, without
limitation, all initiation and membership fees and expenses and all annual or
other periodic fees, dues and costs (including any bond requirement), for the
Executive to become and remain a member of any one or more private country
club, golf club, tennis club, dining club, health club or similar club or
association as the Executive determines are appropriate to his carrying out
his duties hereunder.
(h) The Company shall provide to the Executive on an annual basis a
discretionary amount equal to $25,000 per year for miscellaneous business
related purposes as determined by the Executive in his sole discretion.
(i) The Executive shall be entitled to participate in all other Company
benefit plans, as well as any supplemental benefit or perquisite plans as the
Company may provide from time to time for its senior executives, on a basis
commensurate with his position.
(j) It is the intention of the Company that the Executive shall, after
taking into account any taxes or reimbursements or other benefits, be kept
whole with respect to such reimbursement or other benefit. Accordingly, to
the extent the Executive is taxable on any such reimbursements or benefits,
the Company shall pay the Executive, in connection therewith an amount which,
after all taxes incurred by the Executive on such amount, shall equal the
amount of the reimbursement or benefit being provided.
5. TERMINATION, CHANGE IN CONTROL AND REASSIGNMENT OF DUTIES.
(a) TERMINATION BY COMPANY. The Company shall have the right to
terminate the Executive's employment under this Agreement for Cause (as
defined below) at any time without obligation to make any further payments to
the Executive hereunder. The Company shall have the right to terminate the
Executive's employment for any reason other than for Cause only upon at least
ninety (90) days prior written notice to him, except as otherwise provided in
Section 5(b), which Section shall apply in the event the Executive becomes
unable to perform his obligations hereunder by reason of Disability (as
defined below). In the event the Company terminates the Executive's
employment hereunder for any reason other than for Cause or Disability, then
for the purpose of effecting a transition during the ninety (90) day notice
period of the management of the Company from the Executive to another person
or persons, during such period the Company may reassign the Executive's
duties hereunder to another person or other persons. Such reassignment shall
not reduce the Company's obligations hereunder to make salary, bonus and
other payments to the Executive and to provide other benefits to him during
the remainder of his employment and following the termination of employment,
including without limitation the use of his office and secretarial services
during the remainder of his employment.
As used in this Agreement, the term "Cause" shall mean: (i) the willful
and continued failure by the Executive to substantially perform his duties
hereunder (other than (A) any such willful or
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continued failure resulting from his incapacity due to physical or mental
illness or physical injury or (B) any such actual or anticipated failure
after the issuance of a notice of termination by the Executive for Good
Reason (as defined below)), after demand for substantial performance is
delivered by the Company to the Executive that specifically identifies the
manner in which the Company believes the Executive has not substantially
performed his duties; or (ii) the willful engaging by the Executive in
misconduct which is materially injurious to the Company, monetarily or
otherwise; or (iii) the conviction of a felony by a court of competent
jurisdiction. For purposes of this paragraph, no act, or failure to act, on
the part of the Executive shall be considered "willful" unless done or
omitted to be done by him in bad faith and without reasonable belief that his
action or omission was in the best interest of the Company. Notwithstanding
the foregoing, the Executive's employment shall not be deemed to have been
terminated for Cause unless (A) reasonable notice shall have been given to
him setting forth in detail the reasons for the Company's intention to
terminate for Cause, and if such termination is pursuant to clause (i) or
(ii) above and any damage to the Company is curable, only if Executive has
been provided a period of ten (10) business days from receipt of such notice
to cease the actions or inactions, and he has not done so; (B) an opportunity
shall have been provided for the Executive, together with his counsel, to be
heard before the Board; and (C) if such termination is pursuant to clause (i)
or (ii) above, delivery shall have been made to the Executive of a notice of
termination from the Board finding that in the good faith opinion of a
majority of the Board (excluding the Executive) he was guilty of conduct set
forth in clause (i) or (ii) above, and specifying the particulars thereof in
detail.
(b) TERMINATION UPON DISABILITY AND TEMPORARY REASSIGNMENT OF DUTIES DUE
TO DISABILITY.
(i) If the Executive becomes totally and permanently
disabled during the Employment Period so that he is unable to perform his
obligations hereunder by reasons involving physical or mental illness or
physical injury (A) for a period of ninety (90) consecutive days, or (B) for
an aggregate of ninety (90) days during any period of twelve (12) consecutive
months ("Disability"), then the term of the Executive's employment hereunder
may be terminated by the Board within sixty (60) days after the expiration of
said ninety (90) day period (whether consecutive or in the aggregate, as the
case may be), said termination to be effective ten (10) days after written
notice to the Executive. In the event the Company shall give a notice of
termination under this Section 5(b)(i), then the Company may reassign the
Executive's duties hereunder to another person or other persons. Such
reassignment shall not reduce the Company's obligations hereunder to make
salary, bonus and other payments to the Executive and to provide other
benefits to him, during the remainder of his employment and following the
termination of employment.
(ii) During any period that the Executive is totally
disabled such that he is unable to perform his obligations hereunder by
reason involving physical or mental illness or physical injury, as
7
determined by a physician chosen by the Company and reasonably acceptable to
the Executive (or his legal representative), the Company may reassign the
Executive's duties hereunder to another person or other persons, provided if
the Executive shall again be able to perform his obligations hereunder, all
such duties shall again be the Executive's duties. The cost of any
examination by such physician shall be borne by the Company. Notwithstanding
the foregoing, if the Executive has been unable to perform his obligations
hereunder for reasons involving physical or mental illness or physical injury
for a period of ninety (90) consecutive days or an aggregate of ninety (90)
days during any period of twelve (12) consecutive months, then a
determination by a physician of disability will not be required prior to any
such reassignment. Any such reassignment shall not be a termination of
employment and in no event shall such reassignment reduce the Company's
obligations to make salary, bonus and other payments to the Executive and to
provide other benefits to him under this Agreement during his employment or,
if applicable, following a termination of employment.
(c) TERMINATION BY EXECUTIVE. The Executive's employment may be
terminated by him by giving written notice to the Company as follows: (i) at
any time by notice of at least thirty (30) days; (ii) at any time by notice
for a Good Reason, effective upon giving such notice; (iii) at any time, if
his health should become impaired, provided he has obtained a written
statement from a qualified doctor to such effect, effective upon giving such
notice; or (iv) at any time following but prior to the first anniversary of a
Change in Control (as defined below), effective upon giving such notice. In
the event of a termination by the Executive of his employment, the Company
may reassign the Executive's duties hereunder to another person or other
persons.
As used herein, a "Good Reason" shall mean any of the following:
(A) Failure to be nominated by the Board for election to the Board at
any time such nominations are made, or failure of the stockholders of the
Company to elect the Executive to the Board, or failure of the Board to
elect the Executive as Chairman of the Board, President and Chief Executive
Officer of the Company, or failure to be nominated by the Board of
Directors of any Subsidiary for election to such Board of Directors at any
time such nominations are made, or failure of the stockholders of any
Subsidiary to elect the Executive to the Board of Directors of such
Subsidiary, or failure of the Board of Directors of any Subsidiary to elect
the Executive as President or Chairman of the Subsidiary, or removal from
the Board, the Board of Directors of a Subsidiary or any such office of the
Company or of a Subsidiary, provided that such failure or removal is not in
connection with a termination of the Executive's employment hereunder for
Cause in accordance with Section 5(a) and provided further that any notice
of termination hereunder shall be given by the Executive within ninety (90)
days of such failure or removal;
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(B) Material change by the Company in the Executive's authority,
functions, duties or responsibilities as Chairman of the Board, President
and Chief Executive Officer of the Company (including, without limitation,
material changes in the control or structure of the Company) which would
cause his position with the Company to become of less responsibility,
importance, scope or dignity than his position as of the Commencement Date,
provided that (I) such material change is not in connection with a
termination of Executive's employment hereunder for Cause in accordance
with Section 5(a), (II) such material change is not made in accordance with
Section 5(a) following a termination of Executive's employment by the
Company other than for Cause or Disability, (III) such material change is
not made in accordance with Section 5(b) pertaining to disability,
including without limitation the time period restrictions applicable
thereunder, and (IV) any notice of termination hereunder shall be given by
him within ninety (90) days of when he becomes aware of such change; or
(C) Failure by the Company to comply with any provision of Section 1,
2, 3, 4 or 8 of this Agreement, which has not been cured within fifteen
(15) days after notice of such noncompliance has been given by the
Executive to the Company, provided any notice of termination hereunder
shall be given by the Executive within ninety (90) days after the end of
such fifteen (15) day period;
(D) Failure by the Company to obtain an assumption of this Agreement
by a successor in accordance with Section 14 unless payment or provision
for continuation of benefits under this Agreement have been made in a
manner permitted by Section 5; and
(E) Any purported termination by the Company of the Executive's
employment which is not effected in accordance with the terms of this
Agreement, including without limitation pursuant to a notice of termination
not satisfying the requirements set forth herein (and for purposes of this
Agreement no such purported termination by the Company shall be effective),
which has not been cured within ten (10) days after notice of such
nonconformance has been given by the Executive to the Company, provided any
notice of termination hereunder shall be given by the Executive within
thirty (30) days of receipt of notice of such purported termination.
(F) The Company giving to the Executive the notice contemplated by
Section 1(a) of this Agreement.
For purpose of this Agreement, a "Change in Control" of the Company
shall have the same meaning as set forth in Section 6.7 of the Company's 1997
Incentive Plan.
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(d) SEVERANCE COMPENSATION.
(i) TERMINATION FOR GOOD REASON OR OTHER THAN FOR CAUSE. In
the event the Executive's employment hereunder is terminated (A) by the
Executive or by the Company (or its successors) following a Change in
Control, or (B) by the Executive for a Good Reason or (C) by the Company
other than for Cause (including without limitation in the event the Company
elects at any time not to automatically extend the Executive's employment
hereunder pursuant to the second sentence of Section 1(a) hereof), the
Executive shall be entitled, in addition to the other compensation and
benefits herein provided for, to severance compensation in an aggregate
amount equal to three times the sum of the Final Average Base Salary and the
Final Average Annual Bonus where (A) the "Final Average Base Salary" means
the average of the Executive's Annual Base Salary as in effect for each of
the three years preceding the date of termination and commencing no earlier
than July 1, 1999 (or, if shorter, the number of years from July 1, 1999 to
the date of termination) and (B) the "Final Average Bonus" means the average
of the annual bonuses awarded to the Executive pursuant to Sections 2(b) and
2(c) of this Agreement with respect to the three years preceding the date of
termination and commencing no earlier than July 1, 1999 (or, if shorter, the
number of years from July 1, 1999 to the date of termination; PROVIDED that
if the Executive's employment is terminated prior to his eligibility to earn
an Annual Bonus for the period July 1, 1999 to June 30, 2000, then for
purposes of making the aforementioned computation he shall be deemed to have
earned the maximum Annual Bonus to which he would have been entitled assuming
the attainment by the Executive of the specified performance and other
targets related to designated performance and other goals selected by the
Compensation Committee under the Performance Compensation Plan), payable in a
lump sum at the end of the calendar month in which the termination date
occurs; PROVIDED, HOWEVER, that if the Executive's employment is terminated
following a Change in Control or is terminated by the Company other than for
Cause in anticipation of a Change in Control, such severance compensation
shall be paid in one lump sum on the date of such termination.
(ii) TERMINATION FOLLOWING DISABILITY. In the event the
Executive's employment should be terminated by the Company as a result of
Disability in accordance with Section 5(b) hereof, then the Executive shall
be entitled, in addition to the other compensation and benefits herein
provided for, to severance compensation in an aggregate amount equal to three
times the sum of the Final Average Base Salary as defined in Section
5(d)(i)above, plus the Final Average Bonus as defined in Section 5(d)(i)
above payable in a lump sum at the end of the calendar month in which the
termination date occurs, reduced by the amount of any disability insurance
proceeds actually paid to the Executive or for his benefit during the said
time period.
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(e) EFFECT OF TERMINATION OR CHANGE IN CONTROL UPON EQUITY COMPENSATION.
(i) In the event the Executive's employment hereunder is
terminated by the Company for any reason other than for Cause (including
without limitation an election by the Company not to automatically extend the
Executive's employment hereunder pursuant to the second sentence of Section
l(a) hereof), or in the event the Executive should terminate his employment
for Good Reason, then any restricted stock or unexpired options held by the
Executive (or his assignee) entitling the Executive (or his assignee) to
purchase securities of the Company shall, notwithstanding any contrary
provision in the agreement or plan pursuant to which such restricted stock or
options were granted, vest and/or be exercisable for the remainder of the
original term of such option as set forth in the pertinent option agreement.
(ii) In the event the Executive's employment hereunder is
terminated by the Company for Cause or the Executive voluntarily terminates
his employment (other than for "Good Reason," death or "Disability"), then
effective upon the date such termination is effective, any restricted stock
or options not previously vested shall be forfeited, unless there shall be a
contrary provision in the agreement or plan pursuant to which such restricted
stock or options were granted.
(iii) In the event of the Executive's death while employed
or in the event the Executive's employment should terminate as a result of
Disability, then, any restricted stock or unexpired options held by the
Executive (or his assignee) entitling the Executive (or his assignee) to
purchase securities of the Company shall, notwithstanding any contrary
provision in the agreement or plan pursuant to which such restricted stock or
options were granted, be vested and/or be exercisable for the remainder of
the original term of such option as set forth in the pertinent option
agreement.
(iv) In the event of a Change in Control while the
Executive is employed, then as of the date immediately prior to the date such
Change in Control shall occur, any restricted stock or options held by the
Executive (or his assignee) entitling the Executive (or his assignee) to
purchase securities of the Company, which restricted stock or options are
subject to vesting, shall, notwithstanding any contrary provision in the
agreement or plan pursuant to which such restricted stock or options were
granted, become fully vested and any such options shall become exercisable as
of such date and shall remain exercisable during the respective terms of such
options as set forth in the pertinent option agreement.
(f) CONTINUATION OF BENEFITS, ETC. (i) Subject to the Sections 5(f)(ii)
and 5(f)(iii) below, in the event the Executive's employment hereunder is
terminated by the Executive for a Good Reason or by the Company other than
for "Cause" (including, without limitation, death or "Disability" or in the
event the Company elects not to
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automatically extend the Executive's employment hereunder pursuant to the
second sentence of Section l(a) hereof):
(A) The Executive shall continue to be entitled to the benefits that
the Executive was receiving or to which the Executive was entitled, as of
the date immediately preceding the applicable termination date, pursuant to
Section 4 hereof (except for the benefit described in Section 4(h))at the
Company's expense for a period of time following the termination date
ending on the first to occur of (I) the third anniversary of the
termination date or (II) the date on which the Executive commences
full-time employment by another employer, but only if and to the extent the
Executive is eligible to receive through such other employer benefits which
are at least equivalent on an aggregate basis to those benefits the
Executive was receiving or to which the Executive was entitled under
Section 4 hereof as of immediately preceding the applicable termination
date. If because of limitations required by third parties or imposed by
law, the Executive cannot be provided such benefits through the Company's
plans, then the Company will provide the Executive with substantially
equivalent benefits, on an aggregate basis, at the Company's expense. For
purposes of the determination of any benefits which require a particular
period of employment by the Company and/or the attainment of a particular
age while employed by the Company in order to be payable, the Executive
shall be treated as having continued in the employment of the Company
during such period of time as the Executive is entitled to receive benefits
under this Section 5(f). At such time as the Company is no longer required
to provide the Executive with life and/or disability insurance, as the case
may be, the Executive shall be entitled at the Executive's expense to
convert such life and disability insurance, as the case may be, except if
and to the extent such conversion is not available from the provider of
such insurance.
(B) The Executive shall be entitled, at the Company's expense for a
period of time following the termination date ending on the first to occur
of (A) the third anniversary of the termination date or (B) the date on
which the Executive commences full-time employment by another employer or
becomes self-employed on a full-time basis, to office space located within
ten (10) miles of the principal offices of the Company and secretarial
services substantially commensurate with the office space and secretarial
services furnished by the Company to the Executive prior to the termination
date, and to be furnished executive job search and employment services by
an executive employment firm of national reputation selected by the
Executive and approved by the Board, which approval shall not be
unreasonably withheld or delayed.
(ii) In the event the Executive's employment is terminated
following a Change in Control or is terminated by the Company other than for
Cause in anticipation of a Change in Control, the Company shall pay to the
Executive, in lieu of providing the benefits
12
contemplated by Section 5(f)(i) above, an amount in cash equal to the
aggregate reasonable expenses that the Company would incur if it were to
provide such benefits for a period of time following the termination date
ending on the third anniversary of the termination date, which amount shall
be paid in one lump sum on the date of such termination.
(iii) With respect to any termination of the Executive's
employment (other than by the Company for "Cause" or a voluntary termination
by the Executive) as described in sections 5(f)(i) and 5(f)(ii) above, the
Executive shall be entitled to receive continued participation in medical,
dental and life insurance coverage until (A) the Executive receives
equivalent coverage and benefits under the plans and programs of a subsequent
employer (such coverage and benefits to be determined on a
coverage-by-coverage or benefit-by-benefit basis) or (B) the death of the
later of the Executive or his spouse; PROVIDED that (I) if the Executive is
precluded from continuing his participation in any applicable Executive
benefit plan or program as described above and in Section 4, he shall be
provided with the after-tax economic equivalent of the benefits provided
under the plan or program in which he is able to participate for the period
specified above, (II) the economic equivalent of any benefit forgone shall be
deemed to be the lowest cost that would be incurred by the Executive in
obtaining such benefit himself on an individual basis, and (III) payment of
such after-tax economic equivalent shall be made quarterly in advance.
(g) ACCRUED COMPENSATION. In the event of any termination of the
Executive's employment for any reason, the Executive (or his estate) shall be
paid such portion of his Base Salary and bonuses as he has accrued (including
without limitation as provided below) by virtue of his employment during the
period prior to termination and has not yet been paid, together with any
amounts for expense reimbursement and similar items which have been properly
incurred in accordance with the provisions hereof prior to termination and
have not yet been paid. Such amounts shall be paid within ten (10) days of
the termination date. The amount due to the Executive (or his estate) under
this Section 5(g) in payment of any bonus, including without limitation the
Annual Bonus and/or Annual Stock Option Grant, shall be a proportionate
amount of the bonus that would next be payable to him and would otherwise
have been due to the Executive if such termination had not occurred and such
bonus had been fully earned, and which proportion shall be based on the
number of elapsed days in the applicable bonus period prior to the
termination date and in which the termination date occurs.
(h) RESIGNATION. If the Executive's employment hereunder shall be
terminated by him or by the Company in accordance with the terms set forth
herein, then effective upon the date such termination is effective, he will
be deemed to have resigned from all positions as an officer and Director of
the Company and of any of its Subsidiaries, except as the parties (or with
respect to positions with a Subsidiary, the Executive and the Subsidiary) may
otherwise agree.
13
(i) CERTAIN TAX CONSEQUENCES. Whether or not the Executive becomes
entitled to the payments and benefits described in this Section 5, if any of
the payments or benefits received or to be received by the Executive in
connection with a change in ownership or control of the Company (a "Statutory
Change in Control"), as defined in section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), or the Executive's termination of
employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any person whose actions
result in a Statutory Change in Control or any person affiliated with the
Company or such person) (collectively, the "Severance Benefits") will be
subject to any excise tax (the "Excise Tax") imposed under section 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), the Company shall
pay to the Executive an additional amount equal to the Excise Tax, plus any
additional taxes resulting from the payment to the Executive by the Company
for such Excise Tax (the "Excise Tax Payment").
For purposes of determining whether any of the Severance Benefits
will be subject to the Excise Tax and the amount of such Excise Tax:
(i) all of the Severance Benefits shall be treated as
"parachute payments" within the meaning of Code section
280G(b)(2), and all "excess parachute payments" within the
meaning of Code section 280G(b)(1) shall be treated as subject
to the Excise Tax, unless, in the opinion of tax counsel
selected by Xxxxxxx Xxxxxxx, CPA, Xxxxxxx & Xxxxxxx LLP and
reasonably acceptable to the Executive or in the event Xxxxxxx
Xxxxxxx is unable or unwilling to make such selection, by
other tax counsel selected by the Company and reasonably
acceptable to the Executive, such other payments or benefits
(in whole or in part) do not constitute parachute payments,
including by reason of Code section 280G(b)(4)(A), or such
excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within
the meaning of Code section 280G(b)(4)(B), in excess of the
"Base Amount" as defined in Code section 280G(b)(3) allocable
to such reasonable compensation, or are otherwise not subject
to the Excise Tax; and
(ii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by Xxxxxxx Xxxxxxx,
Xxxxxxx & Xxxxxxx LLP, or in the event that Xxxxxxx Xxxxxxx is unable
or unwilling to make such determination, such determination shall be
made by such other certified public accountant as is selected by the
Company and is reasonably acceptable to the Executive, in accordance
with the principles of Code section 280G(d)(3) and (4).
In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination
of the Executive's employment, the Executive shall repay
14
to the Company, at the time that the amount of such reduction in Excise Tax
is finally determined (the "Reduced Excise Tax"), the difference of the
Excise Tax Payment and the Reduced Excise Tax, plus an additional amount
representing the difference between (A) the amount of any additional taxes
paid by the Company to the Executive for such Excise Tax and (B) the amount
of any additional taxes which should have been paid to the Executive by the
Company with respect to such Reduced Excise Tax. In the event that the Excise
Tax is determined to exceed the amount taken into account hereunder at the
time of the termination of the Executive's employment (including by reason of
any payment the existence or amount of which could not be determined at the
time of the Excise Tax Payment), the Company shall make an additional Excise
Tax payment in respect of such excess (plus any interest or penalties payable
by the Executive with respect to such excess) at the time that the amount of
such excess if finally determined, plus any additional taxes resulting from
the payment to the Executive by the Company for such excess and the interest
and penalties thereon. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax
with respect to the Severance Benefits.
6. CONFIDENTIAL INFORMATION; NON-SOLICITATION; NON-COMPETITION;
RESTRICTIONS ON DISPOSITIONS OF EQUITY SECURITIES.
(a) The Executive shall hold in a fiduciary capacity for the benefit
of the Company all secret, confidential information, knowledge or data
relating to the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the Executive during
the Executive's employment by the Company or any of its affiliated companies
and that shall not have been or now or hereafter have become public knowledge
(other than by acts by the Executive or representatives of the Executive in
violation of this Agreement). During the Employment Period and for a period
of five years thereafter, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal
process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
(b) The Executive shall not, at any time during the Employment
Period and for a period of (i) three years thereafter in the event he
continues to be entitled to receive payments and/or benefits hereunder or
(ii) one year thereafter in the event he is not entitled to receive payments
and/or benefits hereunder, (x) engage or become interested as an owner (other
than as an owner of less than 5% of the stock of a publicly owned company)
stockholder, partner, director, officer, employee, consultant or otherwise in
any business that is competitive with any business conducted by the Company
or any of its affiliated companies during the Employment Period or on the
date of termination as applicable or (y) recruit, solicit for employment,
hire or engage any employee or consultant of the Company or any person who
was an employee or consultant of the Company within two (2) years prior to
the date of termination. The Executive acknowledges that these
15
provisions (I) have been specifically bargained for by the Company and are
supported by separate and specific consideration provided to him by the
Company and (II) are necessary for the Company's protection and are not
unreasonable, since he would be able to obtain employment with companies
whose businesses are not competitive with those of the Company and its
affiliated companies and would be able to recruit and hire personnel other
than employees of the Company. The duration and the scope of these
restrictions on the Executive's activities are divisible, so that if any
provision of this paragraph is held or deemed to be invalid, that provision
shall be automatically modified to the extent necessary to make it valid. The
provisions contained in this paragraph of Section 6(b) of this Agreement
shall not be applicable to the Executive in the event that his employment is
terminated as a result of or in anticipation of a "Change in Control."
(c) Executive and the Company agree that this covenant not to
compete is a reasonable covenant under the circumstances, and further agree
that if in the opinion of any court of competent jurisdiction such restraint
is not reasonable in any respect, such court shall have the right, power and
authority to excise or modify such provision or provisions of this covenant
as to the court shall appear not reasonable and to enforce the remainder of
the covenant as so amended. Executive agrees that any breach of the covenants
contained in this Section 6 would irreparably injure the Company.
Accordingly, Executive agrees that the Company may, in addition to pursuing
any other remedies it may have in law or in equity, withhold payment of any
amounts due hereunder and obtain an injunction against Executive from any
court having jurisdiction over the matter restraining any further violation
of this Agreement by Executive.
(d) The Executive will not (i) exercise any options pertaining to
the Company's Common Stock which have been granted to him (or which may be
granted to him) or (ii) sell or otherwise dispose of any of the Company's
Common Stock or other equity securities of the Company which he owns for a
period of three (3) years from the date hereof, other than in the event of a
"Change in Control": PROVIDED, HOWEVER, that if the price of the Company's
Common Stock is in excess of an average of $12.00 per share for a period of
60 days, then the Executive shall be entitled to sell or otherwise dispose of
his options, Common Stock or other equity securities of the Company
beneficially owned by him; PROVIDED FURTHER that he does not reduce his
aggregate beneficial ownership of equity securities of the Company by more
than 50% of his then aggregate beneficial ownership of the Company's equity
securities at the time of such sales or other dispositions.
7. ENFORCEABILITY. If any provision of this Agreement shall be deemed invalid
or unenforceable as written, this Agreement shall be construed, to the
greatest extent possible, or modified, to the extent allowable by law, in a
manner which shall render it valid and enforceable and any limitation on the
scope or duration of any such provision necessary to make it valid and
enforceable shall be deemed to be a part thereof. No invalidity or
unenforceability of any provision contained herein shall affect any other
portion of this Agreement unless the provision deemed to be so invalid or
16
unenforceable is a material element of this Agreement, taken as a whole.
8. LEGAL EXPENSES. The Company shall pay the Executive's reasonable fees for
legal and tax advice and other related expenses associated with the
negotiation and completion of this Agreement. The Company shall also pay the
Executive's reasonable fees for legal and other related expenses associated
with any disputes arising hereunder or under the stock option agreements
referred to herein if a court of competent jurisdiction shall render a final
judgement in favor of the Executive on the issues in such dispute, from which
there is no further right of appeal. If it shall be determined in such
judicial adjudication that the Executive is successful on some of the issues
in such dispute, but not all, then the Executive shall be entitled to receive
a portion of such legal fees and other expenses as shall be appropriately
prorated.
9. NOTICES. All notices which the Company is required or permitted to give to
the Executive shall be given by registered or certified mail or overnight
courier, with a receipt obtained, addressed to the Executive at the address
referred to above, or at such other place as the Executive may from time to
time designate in writing, or by personal delivery, and to counsel for the
Executive as may be requested in writing by the Executive from time to time.
All notices which the Executive is required or permitted to give to the
Company shall be given by registered or certified mail or overnight courier,
with a receipt obtained, addressed to the Company at the address set forth
above, or at such other address as the Company may from time to time
designate in writing, or by personal delivery, and to counsel for the Company
as may be requested in writing by the Company. A notice will be deemed given
upon the mailing thereof or delivery to an overnight courier for delivery the
next business day, except for a notice of a change of address, which will not
be effective until receipt, and except as otherwise provided in Section 5(a).
10. WAIVERS. No waiver by either party of any breach or nonperformance of any
provision or obligation of this Agreement shall be deemed to be a waiver of
any preceding or succeeding breach of the same or any other provision of this
Agreement.
11. HEADINGS; OTHER LANGUAGE. The headings contained in this Agreement are
for reference purposes only and shall in no way affect the meaning or
interpretation of this Agreement. In this Agreement, as the context may
require, the singular includes the plural and the singular, the masculine
gender includes both male and female reference, the word "or" is used in the
inclusive sense and the words "including," "includes," and "included" shall
not be limiting.
12. COUNTERPARTS. This Agreement may be executed in duplicate counterparts,
each of which shall be deemed to be an original and all of which, taken
together, shall constitute one agreement.
13. AGREEMENT COMPLETE; AMENDMENTS. This Agreement, together with the stock
option agreements pertaining to the stock options referred
17
to in Schedule A hereto, is the entire agreement of the parties with respect
to the subject matter hereof and supersedes all prior agreements, written or
oral, with respect thereto. This Agreement may not be amended, supplemented,
canceled or discharged except by a written instrument executed by both of the
parties hereto, PROVIDED, HOWEVER, that the immediately foregoing provision
shall not prohibit the termination of rights and obligations under this
Agreement which termination is made in accordance with the terms of this
Agreement.
14. BENEFIT AND BINDING NATURE/NONASSIGNABILITY. This Agreement shall be
binding upon and inure to the benefit of the successors and permitted assigns
of the respective parties hereto. This Agreement and the rights and
obligations hereunder are personal to the Company and the Executive and are
not assignable or transferable to any other person, firm or corporation
without the consent of the other party, except as contemplated hereby;
PROVIDED, HOWEVER, in the event of the merger or consolidation of the
Company, whether or not the Company is the surviving or resulting
corporation, the transfer of all or substantially all of the assets of the
Company, or the voluntary or involuntary dissolution of the Company, then the
surviving or resulting corporation or the transferee or transferees of the
Company's assets shall be bound by this Agreement and the Company shall take
all actions necessary to insure that such corporation, transferee or
transferees are bound by the provisions of this Agreement, and provided,
further, this Agreement shall inure to the benefit of the Executive's estate,
heirs, executors, administrators, personal and legal representatives,
distributees, devisees, and legatees. Notwithstanding the foregoing
provisions of this Section 14, the Company shall not be required to take all
actions necessary to insure that a transferee or transferees of the Company's
assets are bound by the provisions of this Agreement and such transferee or
transferees of the Company's shall not be bound by the obligations of the
Company under this Agreement if the Company shall have (a) paid to the
Executive or made provision satisfactory to the Executive for payment to him
of all amounts which are or may become payable to him hereunder in accordance
with the terms hereof and (b) made provision satisfactory to the Executive
for the continuance of all benefits required to be provided to him in
accordance with the terms hereof.
15. GOVERNING LAW. This Agreement will be governed and construed in
accordance with the law of Maryland applicable to agreements made and to be
performed entirely within such state, without giving effect to the conflicts
of laws principles thereof.
16. SURVIVAL. The provisions of Xxxxxxxx 0, 0(x), (x), (x), (x) and (h), 6, 7
and 8 hereof, and any restricted stock or stock option agreement entered into
as described in or pursuant to Section 3 or Schedule A hereof or during the
Executive's employment hereunder shall survive the termination of the
Executive's employment as continuing and separate agreements between the
parties.
17. SUBSIDIARIES. As used herein, the term "Subsidiaries" shall mean all
corporations a majority of the capital stock of which entitling the holder
thereof to vote is owned by the Company or a Subsidiary.
18
18. INTERPRETATION. The Company and the Executive each acknowledge
and agree that this Agreement has been reviewed and negotiated by such party
and its or his counsel, who have contributed to its revision, and the normal
rule of construction, to the effect that any ambiguities are resolved against
the drafting party, shall not be employed in the interpretation of it.
[SIGNATURE PAGE TO FOLLOW]
19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
KEY ENERGY SERVICES, INC.
BY: /s/ XXXXXX XXXXXXXXX
-----------------------------------
XXXXXX XXXXXXXXX
DIRECTOR
EXECUTIVE
/s/ XXXXXXX X. XXXX
-------------------------------------
XXXXXXX X. XXXX
SCHEDULE A
-------------------------
STOCK OPTIONS GRANTED TO EXECUTIVE
PRIOR TO JULY 1, 1999
-------------------------
(i) As performance-based incentive compensation to the Executive in
connection with services to be rendered, the Company has previously granted to
the Executive pursuant to the Company's 1995 Stock Option Plan (the "1995 Stock
Option Plan") certain options (the "1995 Options")to purchase shares of the
Company's common stock, $.01 per value per share (the "Common Stock"), on the
terms described below:
Date of No. of Exercise Expiration Vesting
Grant Shares Price Date Schedule
----- ------ ----- ---- --------
7/6/95 20,000 $5.00 6/30/05 Fully Vested
7/6/95 80,000 $5.00 6/30/05 Fully Vested
7/6/95 130,000 $5.00 6/30/05 Fully Vested
7/6/95 20,000 $5.00 6/30/05 Fully Vested
(ii) In addition, as performance based incentive compensation to the
Executive in connection with services to be rendered, the Company has
previously granted to the Executive pursuant to the Company's 1997 Incentive
Plan (the "1997 Incentive Plan") certain options (the "1997 Options") to
purchase shares of the Company's Common Stock on the terms described below:
Date of No. of Exercise Expiration Vesting
Grant Shares Price Date Schedule
----- ------ ----- ---- --------
4/16/97 125,000 $13.25 4/16/07 31,250 6/30/97
31,250 6/30/98
31,250 6/30/99
31,250 6/30/00
9/4/98 500,000 $ 7.125 9/3/08 125,000 9/4/98
125,000 9/4/99
125,000 9/4/00
125,000 9/4/01
5/4/99 700,000 $ 3.00 5/3/99 233,333 5/4/00
233,333 5/4/01
233,334 5/4/02
SCHEDULE B
COMPANY PAID COVERAGES
1. Life Insurance
$5,000,000 payable to beneficiaries designated by the
Executive.
2. Business Travel Accident Insurance
Death and dismemberment benefits up to $1,000,000 with
twenty-four hour business and pleasure travel coverage.
3. Long Term Disability Insurance
Salary continuation benefit for total disability.
Benefit commences with ninetieth day of disability and
continues to a maximum of age sixty-five. Annual
maximum benefit shall be 60% of Base Salary, plus any
Annual Bonus described in Section 2(b) and any bonus
described in Section 2(c) paid to the Executive as of
the end of the most recent fiscal/ calendar year
preceding the disability.
4. Medical and Dental Coverage
Comprehensive medical and dental coverage, including an
annual physical, pursuant to which all medical and
dental expenses incurred by the Executive, his spouse
and his children will be reimbursed by Company provided
insurance, or in the absence of insurance coverage,
directly by the Company. In the event that the
Executive's employment is terminated, other than (a)
for "Cause" by the Company as defined in this Agreement
or (b) voluntarily by the Executive (I.E., other than
by death or "Disability", "Good Reason" or a "Change in
Control", all as defined in this Agreement), such
coverage will be continued until the earlier of (A) the
death of the later of the Executive or his spouse or
(B) the commencement of coverage with a subsequent
employer, but only to the extent such coverage
duplicates or exceeds the coverage provided by the
Company. In addition, at least twice a year during the
Employment Period, the Executive shall submit to two
(2) additional physical examinations and regimens at
any facility selected by the Executive and the results
of such examinations and regimens will be submitted to
the Board of Directors.
5. Director and Officer Liability Insurance--Minimum coverage of
at least $50 million
6. Umbrella Policy--Company shall provide the Executive with a
personal Umbrella Policy in the amount of coverage of
$5,000,000.
