EMPLOYMENT AGREEMENT
Exhibit
10.1
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as
of October 25, 2008, is between Natural Gas Services Group, Inc., a Colorado
corporation (the "Company"), and
Xxxxxxx X. Xxxxxx, an individual residing in Midland, Texas (the "Employee").
WHEREAS, the Employee has been employed
by the Company since January 13, 2005, and presently serves as President, Chief
Executive Officer and Chairman of the Board; and
WHEREAS, the Company and the Employee
desire for the Company’s employment of the Employee be subject to the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the
premises and the mutual covenants and agreements herein contained, and intending
to be legally bound hereby, the Company and the Employee hereby agree as
follows:
1. Employment. The
Company agrees to employ the Employee, and the Employee agrees to continue in
the employ of the Company, upon the terms and subject to conditions herein
provided.
2. Term. The
employment of the Employee shall be for a period (referred to herein as the
"Employment
Term") commencing on the date of this Agreement and ending on the earlier
of: (i) the effective date of any "Fundamental Change" with respect
to the Company or with respect to the Employee; (ii) the date of termination of
Employee's employment pursuant to Section 5 hereof; or (iii) the fifth
anniversary of the date of this Agreement.
For purposes hereof, a "Fundamental Change"
shall occur with respect to: (i) the Company on the effective date of
any dissolution, merger, consolidation, sale of all or substantially all of the
Company's assets, recapitalization or any other type of transaction which
results in 50% or more of the Company's common stock being changed into, or
exchanged for, different securities of the Company, as applicable, or other
securities or interests in other persons or entities, and (ii) the Employee on
the effective date of any change in the duties, functions, responsibilities or
authority of the Employee or any decrease in the base salary, eligible bonus
percentage or existing perquisites of the Employee in effect at that
time.
3. Position and
Duties.
(a)
Position. During
the Employment Term, the Employee shall serve as President, Chief Executive
Officer and Chairman of the Board of the Company. In such capacity, the Employee
shall have such duties, functions, responsibilities, and authority customarily
appertaining to the position of president, chief executive officer and chairman
of the board of a corporation; subject, however, to applicable restrictions
imposed by the bylaws of the Company and to the directives of the Board of
Directors of the Company or its Compensation Committee.
-1-
Exhibit 10.1
(b) Duties. During
the Employment Term, the Employee shall devote his full time, skill and
attention, and his best efforts during normal business hours to, and in
furtherance of, the business and affairs of the Company and its subsidiaries and
affiliates (collectively, the "Related Parties");
except for usual, ordinary and customary periods of vacation and absence due to
illness or other disability; provided, however, that Employee may, subject to
the Company's code of ethics and conflict of interest policies as in effect from
time to time, devote reasonable periods of time in connection with the following
activities, if such activities do not materially interfere with the performance
of Employee's duties and services hereunder and do not consume more than 10% of
Employee's working hours:
(i) fulfilling
speaking engagements; and
(ii) engaging
in charitable and community activities.
4. Compensation and Related
Matters.
(a) Base
Salary. Effective January 14, 2008 the Company is paying the
Employee a base salary at the rate of $275,000.00 per annum. This base salary
shall be reviewed at least annually within 15 days of the anniversary date of
the Employee’s date of employment and increases in such base salary may be
granted at the sole discretion of the Board of Directors of the Company or its
Compensation Committee. If from time to time the Board of Directors
of the Company or its Compensation Committee increases the Employee’s base
salary, the increased base salary amount shall become the minimum base salary
under this Agreement.
(b) Equity
Awards. Company shall award Employee a minimum of 30,000 stock
options or equivalent equity awards each year on the anniversary of Employee’s
employment.
(c) Bonuses. In
addition to base salary, the Employee shall be entitled to receive on an annual
basis during the Employment Term a cash bonus of up to 50% of the Employee’s
base salary, the amount of which will be based upon and subject to parameters
established by the Board of Directors of the Company or its Compensation
Committee. Higher bonus amounts may be awarded at the discretion of the Company
or its Compensation Committee. Any such bonuses shall be payable to the Employee
in the manner specified by the Board of Directors of the Company or its
Compensation Committee at the time any such bonus is awarded.
(d) Benefits. The
Employee shall, during the Employment Term, be eligible to participate in such
insurance, medical and other employee benefit plans, whether now in place or
that may be implemented from time to time in the future, including, but not
limited to, retirement (401k) plans, of the Company which may be in effect, from
time to time, to the extent such plans are then generally available to all
employees or to senior management employees of the Company, with the following
considerations:
(i)
Company shall pay all monthly premiums for any health insurance plans, including
but not limited to dental and vision plans, and similar benefit plans the
Employee chooses to participate in, provided that said plans are available
through the Company as a customary employee benefit.
-2-
Exhibit 10.1
(ii)
Company shall pay premiums for comprehensive term life insurance for the
Employee in coverage amounts equal to three (3) times his annual base
salary.
(iii)
Company shall pay all costs, fees (professional or otherwise), tests,
prescriptions, hospital charges and any other expenses incurred to cover the
total cost of a comprehensive annual physical examination for
Employee.
(e) Director’s and Officer’s
Insurance The Company shall provide Employee with comprehensive
insurance coverage in sufficient amounts relative to his duties as the Chief
Executive Officer and Chairman of the Board of a publicly-held and listed
company.
(f) Professional Organization
Dues. During the Employment Term, the Company shall pay the
initiation fees and periodic dues for membership in any professional
organizations in which the Employee is as of the date of this
Agreement
a member, or which are otherwise approved by the
Board of Directors of the Company or its Compensation Committee, and the Company
shall pay all charges and expenses, including reasonable travel expenses,
incurred by the Employee in connection with membership in such
organizations.
(g) Company
Vehicle. The Company shall provide a vehicle of the Employee’s
choice for the Employee to use in connection with his employment obligations
with the Company (the value of any such vehicle shall be approved by the
Compensation Committee of the Board of Director’s of the Company). The Employee
shall be able to use the vehicle for personal use as long as said use is not
deemed excessive..
(h) Vacations. The
Employee shall be entitled to five (5) weeks of vacation each
calendar year, with pay, beginning with calendar year 2008.
(i) Expenses. The
Employee will be reimbursed for reasonable expenses incurred in the performance
of his duties and services hereunder and in furtherance of the business of the
Company and the Related Parties upon presentation by the Employee of an itemized
account, accompanied by appropriate receipts satisfactory to the
Company.
5. Termination of
Employment.
(a) The
Employee’s employment hereunder:
(i) shall
automatically terminate upon the occurrence of any of the following: (A) the
mental or physical incapacity or inability of the Employee to perform his duties
for a consecutive period of one hundred twenty (120) days or a non-consecutive
period of one hundred eighty (180) days during any twelve month period; (B) the
death of the Employee; or (C) the voluntary resignation or retirement of the
Employee; and
-3-
Exhibit 10.1
(ii) may
be terminated by the Company, at any time, for "cause", which shall mean by
reason of any of the following: (A) the Employee's conviction of, or plea of
nolo contendere to, any felony or to any crime or offense causing substantial
harm to the Company or any of the Related Parties (whether or not for personal
gain) or involving acts of theft, fraud, embezzlement, moral turpitude or
similar conduct; (B) malfeasance in the conduct of the Employee’s duties,
including, but not limited to, (1) willful and intentional misuse or diversion
of any of the Company’s or Related Parties' funds, (2) embezzlement, or (3)
fraudulent or willful and material misrepresentations or concealments on any
written reports submitted to the Company or any of the Related Parties, (C)
material failure to perform the duties of the Employee’s employment or material
failure to follow or comply with the reasonable and lawful written directives of
the Board of Directors of the Company, provided, however, that the
Employee shall have been informed, in writing, of such material failure and
given a period of not more than 60 days to remedy same; or (D) a material breach
by the Employee of the provisions of this Agreement (including, without
limitation, any breach of Section 3(b) of this Agreement).
(b) If
the Employee's employment is terminated by reason of any of the circumstances
set forth in Sections 5(a)(i)(C) or 5(a)(ii), the Employee shall not be entitled
to receive any of the benefits set forth in Section 5(c), unless otherwise
authorized by the Board of Directors of the Company, and all obligations of the
Company and the Employee (except for restrictions pertaining to confidential or
proprietary information) under this Agreement shall automatically
terminate.
(c) If
the Employee’s employment is terminated as the result of a Fundamental Change
with respect to the Company or with respect to the Employee or for any reason
other than as set forth in Sections 5(a)(i)(C) or 5(a)(ii), the Employee shall,
subject to the provisions of Section 5(d), be entitled to receive from the
Company a severance benefit consisting of the following: (i) a single
lump sum cash payment equal to the amount owed through the remaining term of
this Agreement at the Employee’s base salary as in effect at the date of the
Employee’s termination of employment; provided, however, that such amount shall
not be less than 300% of such annual base salary, which severance benefit shall
be paid no later than thirty (30) days following the Employee’s termination of
employment; (ii) all stock options, restricted stock and/or equity awards of any
kind, whether for common stock, preferred stock, warrants or any other
securities of the Company, owned or due and owing to Employee, shall immediately
vest 100% to Employee on the date of the Employee’s termination of employment;
(iii) the health care and insurance benefits (e.g., health, dental,
vision, life, disability, etc.) being provided by the Company to the Employee on
the date of the Employee’s termination of employment shall continue in place at
no cost to the Employee for a period of thirty-six (36) months after such
termination date; (iv) the Employee shall be entitled to receive any individual
bonuses or individual incentive compensation not yet paid but due and owing to
the Employee under the Company’s compensation plan or plans for the years prior
to the year of the Employee’s termination of employment, which amounts shall be
paid to the Employee in a single lump sum cash payment no later than thirty (30)
days following the date of the Employee’s termination of employment; (v) the
Employee shall be entitled to receive any bonuses or individual incentive
compensation not yet paid to the Employee under the Company’s compensation plan
or plans equal to the amount owed through the remaining term of this Agreement,
but not less than 300% of the annual bonus or incentive compensation amount,
which bonuses or individual incentive
-4-
Exhibit
10.1
compensation
shall be calculated as if the Employee had remained employed by the Company
during that period and earned at the maximum award level, and shall be paid in a
single lump sum cash payment to the Employee within 30 days of Employee’s
termination; and (vi) the Employee shall be entitled to or shall
immediately vest 100% in any and all other compensation plans, bonus plans or
incentive plans, including any owned or due and owing, that Employee
participated in or contributed to at the date of the Employee’s termination of
Employment but that is not covered by (ii) through (v) preceding.
(d) The
severance benefit paid to the Employee pursuant to Section 5(c) shall be in
consideration of the Employee’s continuing obligations hereunder after such
termination, including, without limitation, the Employee’s obligations under
Section 6. Further, as a condition to the receipt of such severance
benefit, the Company, in its sole discretion, may require the Employee to first
execute a release, in a form mutually agreeable between the Employee and the
Company, releasing the Company and all Related Parties, and their officers,
directors, employees, and agents, from any and all claims and from any and all
causes of action of any kind or character, including, but not limited to, all
claims and causes of action arising out of the Employee’s employment with the
Company or any of the Related Parties or the termination of the Employee’s
employment. The performance of the Company’s obligations under
Section 5(c), including the Company’s payment of the severance benefit, shall
constitute full settlement of all such claims and causes of
action. The Employee’s rights under Section 5(c) are the Employee’s
sole and exclusive rights against the Company and the Related Parties and the
Company’s sole and exclusive liability to the Employee under this Agreement, in
contract, tort, or otherwise, for the termination of the Employee’s employment
with the Company. The decision as to whether “cause” exists for
termination of the employment relationship of the Employee with the Company and
whether and as of what date the Employee has become incapacitated in the manner
described in Section 5(a)(i) are delegated to the Board of Directors of the
Company for determination. If the Employee or the Employee’s legal
representative, as the case may be, desire to dispute any determination made by
the Board of Directors of the Company under this Section 5(d), the Employee or
his legal representative, as the case may be, must notify (a “Dispute
Notification”) the Company of such desire within thirty (30) days of the
Employee’s receipt of notification of such a determination by the
Board. Within sixty (60) days of the Company’s receipt of a Dispute
Notification, the parties shall mediate the dispute in front of an independent
mediator acceptable to both the Employee and the Company and shall work in good
faith to resolve the dispute at such mediation.
6. Business Opportunities and
Intellectual Property; Personal Investments; Covenant not to Compete;
Confidentiality. The Employee acknowledges that in the course
of his employment by the Company and performance of services on behalf of the
Company he will become privy to various business opportunities, economic and
trade secrets and relationships of the Company and the Related Parties.
Therefore, in consideration of this Agreement and the consummation of the
Transaction, the Employee hereby agrees as provided below in this
Section
-5-
Exhibit 10.1
(a) Business Opportunities and
Intellectual Property. The Employee:
(i) shall
promptly disclose to the Company all business opportunities (including, without
limitation, those relating to the business of manufacturing, fabricating,
selling, leasing and maintaining of natural gas compressors or the design and
manufacture of natural gas flare systems, components and ignition systems)
developed by the Employee during the Employment Term, or originated by any third
party and brought to the attention of the Employee during the Employment Term,
together with information relating thereto (herein collectively called "Business
Opportunities");
(ii) shall
promptly disclose to the Company any ideas, inventions, discoveries, processes,
designs, methods, substances, articles, computer programs and improvements,
whether or not patentable or copyrightable (all of the foregoing being
hereinafter collectively called "Intellectual
Property"), which the Employee discovers, conceives, invents, creates or
develops, alone or with others, during the Employment Term, if such discovery,
conception, invention, creation or development (A) occurs in the course of the
Employee’s employment with the Company, or (B) occurs with the use of any of the
Company’s or the Related Parties’ time, materials or facilities, or (C) in the
opinion of the Board of Directors of the Company, relates or pertains in any way
to the Company’s or the Related Parties' purposes, activities or
affairs;
(iii) hereby
assigns and agrees to assign to the Company and its successors, assigns or
designees, all of the Employee’s right, title and interest in and to all
Business Opportunities and Intellectual Property that the Employee is obligated
to disclose to the Company pursuant hereto; and
(iv) acknowledges
and agrees that all Business Opportunities and Intellectual Property constitute
the exclusive property of the Company and accordingly agrees that Employee will
not (directly or indirectly through any family members), and will not permit any
of his controlled affiliates to, (A) invest or otherwise participate alongside
the Company or the Related Parties in any Business Opportunities, (B) invest or
otherwise participate in any business or activity relating to a Business
Opportunity, regardless of whether the Company or any of the Related Parties
ultimately participates in such business or activity, or (C) use for any purpose
other than on behalf of the Company or the Related Parties, any information
pertaining to Business Opportunities.
(b) Personal
Investments. Employee agrees that during the Employment Term,
Employee (whether in his own name or in the name of any family members or made
by Employee's controlled affiliates) will not make any investments with or in
any person or entity (other than the Company) which relates to the business of
manufacturing, fabricating, selling, leasing and maintaining of natural gas
compressors or the design and manufacture of natural gas flare systems,
components and ignition systems.
-6-
Exhibit 10.1
(c) Confidentiality
Obligations. Employee agrees that during the Employment Term
and the Noncompetition Period, Employee will not knowingly use, publish,
disseminate or otherwise disclose, directly or indirectly, to any person other
than the Company or the Related Parties and their respective officers, directors
and employees, any Business Opportunities, Intellectual Property and any other
information heretofore or hereafter acquired, developed or used by the Company
or any of the Related Parties relating to their business or their operations,
properties, prospects, employees, customers, consultants, vendors, joint venture
partners or co-investors which constitutes proprietary or confidential
information of the Company or any of the Related Parties ("Confidential
Information"), including, without limitation, any Confidential
Information contained in any customer files, contract files, production records,
maintenance records, reports and related data, memoranda, notes, records,
drawings, manuals, correspondence, financial and accounting information,
customer lists, statistical data and compilations, patents, copyrights,
trademarks, trade names, inventions, formulae, methods, processes, agreements,
contracts, manuals or any other documents relating to the business of the
Company or any of the Related Parties (collectively, the "Company’s Business
Records"), but excluding any Confidential Information which has become
part of common knowledge or understanding in the natural gas compressor industry
or otherwise in the public domain (other than from disclosure by Employee in
violation of this Agreement), provided, however, this
paragraph (c) shall not be applicable to the extent Employee is required to
testify in a judicial or regulatory proceeding pursuant to the order of a judge
or administrative law judge after Employee requests that such Confidential
Information be preserved.
(d) Non-Compete
Covenant. Employee agrees that during the Employment Term,
Employee will not knowingly:
(i) engage
or participate in any manner, whether directly or indirectly through any family
member or as an employee, employer, consultant, agent, principal, partner, more
than one percent shareholder, officer, director, licensor, lender, lessor or in
any other individual or representative capacity, in any business activity that
relates to (A) the business of manufacturing, fabricating, selling, leasing and
maintaining of natural gas compressors, (B) the design and manufacture of
natural gas flare systems, components and ignition systems, (C) installing and
servicing flare stacks and related ignition and control devices or (D) in any
other business or activity related to the natural gas compressor industry that
is in competition in any manner whatsoever with the business of any of the
Company or the Related Parties. The covenant and restrictions in this
Section 6(d) pertain to the geographic areas comprised of (x) Midland and Ector
Counties, Texas, and all counties adjacent to Midland and Ector Counties, Texas,
and (y) Tulsa County, Oklahoma, and all counties adjacent to Tulsa County,
Oklahoma (all of such counties being collectively referred to herein as, the
"Noncompete
Area"); provided, however, such
covenant and restrictions shall not preclude the Employee from engaging or
participating in the above referenced business activities on behalf of any
company that conducts a majority of its business operations outside of the
Noncompete Area and whose principal offices are situated outside of the
Noncompete Area, or from:
-7-
Exhibit 10.1
(A) making
investments in securities of oil and gas companies, oil and gas service
companies, and natural gas compressor companies which are registered on a
national stock exchange, if the aggregate amount owned by Employee and all
family members and affiliates does not exceed one percent of such company's
outstanding securities; or
(B) maintaining
his personal investments (whether in his own name or in the name of any family
members), if such personal investments and controlled affiliates do not engage
in any business activity that relates to the business of manufacturing,
fabricating, selling, leasing and maintaining of natural gas compressors, or the
design and manufacture of natural gas flare systems, components and ignition
systems, or the installation and servicing of flare stacks and related ignition
and control devices; or
(ii) actively
solicit, directly or indirectly, any employee (or person who within the
preceding ninety (90) days was an employee) of the Company or any of the Related
Parties or any other person who is under contract with or employed by the
Company or any of the Related Parties, to terminate his or her employment by, or
contractual relationship with, such person or to refrain from extending or
renewing the same (upon the same or new terms) or to become employed by or to
enter into contractual relations with any Persons other than such person or to
enter into a relationship with a competitor of the Company or any of the Related
Parties.
(e) For
purposes of this Agreement, the term "Noncompetition
Period" means the period commencing on the date Employee ceases to be
employed hereunder and ending on the second anniversary of such
date.
(f) The
invalidity or non-enforceability of this Section 6 in any respect shall not
affect the validity or enforceability of this Section 6 in any other respect or
of any other provision of this Agreement. If any provision of this Section 6
shall be held invalid or unenforceable by a court of competent jurisdiction by
reason of the geographic or business scope or the duration thereof, such
invalidity or unenforceability shall attach only to the scope or duration of
such provision and shall not affect or render invalid or unenforceable any other
provision of this Agreement, and, to the fullest extent permitted by law, this
Agreement shall be construed as if the geographic or business scope or the
duration of such provision had been more narrowly drafted so as not to be
invalid or unenforceable.
(g) Employee
acknowledges that the Company's remedy at law for any breach of the provisions
of this Section 6 is and will be insufficient and inadequate and that the
Company shall be entitled to equitable relief, including by way of temporary and
permanent injunction, in addition to any remedies the Company may have at
law.
(h) The
provisions of this Section 6 shall survive termination of this
Agreement.
-8-
Exhibit 10.1
(i)
The representations and covenants contained in this Section 6 on the part of the
Employee will be construed as ancillary to and independent of any other
provision of this Agreement. The provisions of this Section 6 shall continue to
be binding upon the Employee in accordance with their terms, notwithstanding the
termination of the Employee's employment hereunder for any reason or the
Company’s breach of any of its obligations under this Agreement.
(j) The
parties to this Agreement agree that the limitations contained in this Section 6
with respect to time, geographical area and scope of activity are reasonable.
However, if any court shall determine that the time, geographical area or scope
of activity of any restriction contained in this Section 6 is unenforceable, it
is the intention of the parties that such restrictive covenant set forth herein
shall not thereby be terminated but shall be deemed amended to the extent
required to render it valid and enforceable.
7. Business
Records. The Employee agrees to promptly deliver to the
Company, upon termination of his employment hereunder, or at any other time when
the Company so requests, all of the Company’s Business Records (and all copies
thereof and therefrom). The Employee confirms that all of the Company’s Business
Records (and all copies thereof and therefrom) constitute the exclusive property
of the Company and the Related Parties. The obligation of confidentiality set
forth in Section 6 shall continue notwithstanding the Employee's delivery of any
such documents to the Company. The provisions of this Section 7 shall continue
in effect notwithstanding termination of the Employee's employment hereunder for
any reason.
8. Divisibility of
Agreement. If any term, condition or provision of this
Agreement is for any reason rendered void, all remaining terms, conditions and
provisions shall remain and continue as valid and enforceable obligations of the
parties hereto.
9. Notices. Any
notices or other communications required or permitted to be sent hereunder shall
be in writing and shall be duly given if personally delivered or sent postage
pre-paid by certified or registered mail, return receipt requested, as
follows:
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(a)
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If
to Employee:
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By:
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Xxxxxxx
X. Xxxxxx
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0000
Xxxxxxx Xx.
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Xxxxxxx,
Xxxxx 00000
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(b)
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If
to Company:
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By:
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Natural
Gas Services Group, Inc.
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000
X. Xxxx Xx., Xxxxx 000
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Xxxxxxx,
Xxxxx 00000
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Attn:
Xxxxxxx X. Xxxxxx, Xx.
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-9-
Exhibit 10.1
Either
party may change his or its address for the sending of notice to such party by
written notice to the other party sent in accordance with the provisions
hereof.
10. Complete
Agreement. This Agreement contains the entire understanding of
the parties with respect to the employment of Employee and supersedes all prior
arrangements or understandings with respect thereto and all oral or written
employment agreements or arrangements between the Company (and any of its
subsidiaries) and Employee. This Agreement may not be altered or amended except
by a writing, duly executed by the party against whom such alteration or
amendment is sought to be enforced.
11.
Assignment. This
Agreement is personal and non-assignable by Employee. It shall inure to the
benefit of any corporation or other entity with which the Company shall merge or
consolidate or to which the Company shall lease or sell all or substantially all
of its assets and may be assigned by the Company to any affiliate of the Company
or to any corporation or entity with which such affiliate shall merge or
consolidate or which shall lease or acquire all or substantially all of the
assets of such affiliate.
12. Counterparts. This
Agreement may be executed in counterparts, each of which shall be an original
and all of which together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, each of the parties
hereto has executed this Agreement in multiple counterparts as of the day and
year first above written.
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COMPANY:
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NATURAL
GAS SERVICES GROUP, INC
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By:
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/s/
Xxxxxxx X. Xxxxxx
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Xxxxxxx
X. Xxxxxx, Xx.
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Chairman
of the Compensation Committee
of
the Board of Directors
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EMPLOYEE:
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By:
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/s/
Xxxxxxx X. Xxxxxx
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Xxxxxxx
X. Xxxxxx
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-10-
