1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of this 16th
day of March, 1999 by and between XXXXXXX X. XXXXXXX, 0000 Xxxxxxxx Xxxxx,
Xxxxxxx, Xxxxx 00000, (the "Executive"), and SIERRA WELL SERVICE, INC., a
Delaware corporation with its principal offices at 000 X. Xxx Xxxxxx, Xxxxxxx,
Xxxxx 00000 (the "Company").
Recitals
The Company desires to employ the Executive as the President and Chief
Executive Officer of the Company and the Executive desires to work for the
Company in such capacities.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the Company and the Executive hereby agree as follows:
1. Employment; Term.
(a) The Company hereby agrees to employ the Executive, and the
Executive hereby accepts employment by the Company, as the Company's President
and Chief Executive Officer, such employment to commence as of May 1, 1999 (the
"Commencement Date") and to continue until the close of business on April 30,
2004, unless sooner terminated in accordance herewith (the "Employment Period").
(b) The Executive shall have the responsibilities, duties and authority
commensurate with his positions as the President and Chief Executive Officer of
the Company, including without limitation the usual duties of a President and
Chief Executive Officer and those duties of President and Chief Executive
Officer, if any, set forth in the Company's bylaws and will be responsible,
subject to the further direction of the Chairman of the Board and the Board of
Directors of the Company (the "Board"), for participating in the management and
direction of the Company's business and operations. The Executive will, if
elected, serve as a director of the Company and its subsidiaries and perform all
duties incident to such positions and such specific other tasks as may from time
to time be assigned to him by the Chairman of the Board or the Board.
(c) 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 serve on boards of directors
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.
(d) The principal location at which the Executive will substantially
perform his duties will be the Company's offices at 000 X. Xxx Xxxxxx, Xxxxxxx,
Xxxxx 00000.
2
2. Salary; Bonuses; Expenses.
(a) During the Employment Period, the Company will pay base
compensation to the Executive at the annual rate of Two Hundred Fifty Thousand
and No/100 Dollars ($250,000) per year (the "Base Salary"), payable in
substantially equal installments in accordance with the Company's existing
payroll practices, but no less frequently than monthly.
(b) The Company will additionally pay a commencement bonus to the
Executive in the total amount of One Hundred Thousand and No/100 Dollars
($100,000) (the "Commencement Bonus"), payable in four (4) semiannual
installments of $25,000 each on May 1, 1999, November 1, 1999, May 1, 2000, and
November 1, 2000, respectively.
(c) The Company will further pay an annual incentive bonus to the
Executive in an amount not less than Fifty Thousand and No/100 Dollars ($50,000)
and not more than Two Hundred Fifty Thousand and No/100 Dollars ($250,000) per
year, and otherwise determined in accordance with the performance criteria set
forth on Schedule 2(c) attached hereto and made a part hereof (the "Annual
Incentive Bonus"), payable in arrears commencing May 1, 2000 for each calendar
year of employment hereunder (prorated to reflect the actual number of months of
employment by Executive in the applicable calendar year).
(d) The Executive shall be reimbursed by the Company for reasonable
travel, lodging, meal and other expenses incurred by him in connection with
performing his services hereunder in accordance with the Company's policies from
time to time in effect.
3. Bonus Stock. Subject to all of the other terms and conditions of this
Agreement, and in addition to the monetary compensation set forth in Section 2
hereof, the Company agrees to issue to the Executive during the Employment
Period Common Stock (as defined in Section 5(c)) of the Company totaling up to
four percent (4%) of the sum of (a) the issued and outstanding Common Stock
(hereinafter defined) of the Company as of the date of this Agreement, plus (b)
any Common Stock which may hereafter be issued by the Company to Enron Capital &
Trade Resources Corp., or its designees (collectively, "Enron"), including
without limitation Joint Energy Development Investments Limited Partnership and
Joint Energy Development Investments II Limited Partnership, in connection with
the extension, renewal, and modification of the Company's existing credit
facility with Enron or its Affiliates substantially on the terms set forth in
that certain Term Sheet dated as of March 10, 1999 (accepted as of March 15,
1999), between Enron Capital & Trade Resources Corp. and the Company or on such
other terms as may be mutually acceptable to those parties and the Executive
(any such extension, renewal, and modification so effectuated being hereinafter
referred to as the "Enron Loan Modification") (all such stock to be so issued to
the Executive pursuant to this Section 3 being hereinafter referred to as the
"Bonus Stock"), as follows.
(a) The Company shall issue one-half (1/2) of the Bonus Stock to
the Executive on or before sixty (60) days following the
Commencement Date;
-2-
3
(b) The Company shall issue the remaining one-half (1/2) of the
Bonus Stock to the Executive in equal one-fifth (1/5)
proportions on each of the next five (5) ensuing anniversary
dates of the Commencement Date, starting May 1, 2000 and
continuing through May 1, 2004 when the entirety of the Bonus
Stock shall have been issued;
(c) Contemporaneously with the execution and delivery of this
Agreement, but effective as of the Commencement Date, the
Company and the Executive are entering into a shareholder
agreement that is substantially identical in form and
substance to that attached hereto as Exhibit A (the
"Shareholder Agreement"). All Bonus Stock issued by the
Company pursuant to this Agreement shall be issued expressly
subject to the terms, provisions, and conditions of the
Shareholder Agreement;
(d) The Company shall from time to time, as may be necessitated by
issuances of Common Stock in the Company to Enron pursuant to
the Enron Loan Modification, issue such additional shares of
its Common Stock to the Executive as may be necessary to
maintain his ownership of Common Stock in the Company in
accordance with the above specified percentages of ownership
as of any applicable time;
(e) The Executive likewise shall from time to time, in connection
with any reacquisitions by the Company of its Common Stock
from Enron pursuant to the Enron Loan Modification, surrender
to the Company, without cost to the Company, such shares of
the Bonus Stock as may be requisite to prevent the Executive's
percentage of ownership of the equity of the Company by virtue
of the Bonus Stock from exceeding at any given time the
percentages of ownership prescribed in this Section 3; and
(f) Except as contemplated above regarding issuances of Common
Stock by the Company to Enron in connection with the Enron
Loan Modification, no preemptive or anti-dilutive rights shall
exist in favor of the Executive or any other owner of the
Bonus Stock with respect to issuances of capital stock or
other equity by the Company following the date of this
Agreement.
4. Benefit Plans; Vacations. In connection with the Executive's employment
hereunder, he shall be entitled during the Employment Period (and thereafter to
the extent provided in Section 5(f) hereof) to the following additional
benefits:
(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 Exhibit 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
-3-
4
to time, but not less than twenty-one (21) days 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 Executive shall be entitled to receive an allowance of $1,000
per month, plus reimbursement for the costs of fuel incurred by the Executive,
in connection with the use of his automobile during the Employment Period.
(d) 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.
5. Termination, Change of 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 of any kind
or issue any further Bonus Stock 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 Executive's management functions 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, to issue any further Bonus
Stock to the Executive, and to provide to him any other benefits which may be
expressly required under this Agreement during the remainder of his employment
and following the termination of his 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 continued failure resulting from
this 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
-4-
5
or otherwise; or (iii) the conviction of a felony by a court of competent
jurisdiction; or (iv) the inability of the Executive to perform his duties
hereunder for a period twelve (12) or more consecutive months due to injunctive
or other equitable relief issued at the instance or request of a third party by
a court of competent jurisdiction prohibiting the employment of the Executive by
the Company as its President and Chief Executive Officer (notwithstanding the
good faith efforts of the Company pursuant to Section 19 to contest any such
proceedings) (an "Employment Prohibiting Order"). 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
the 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
Company 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, to issue Bonus Stock to the Executive, and to provide to him any
other benefits which may be expressly required under this Agreement during the
remainder of his employment and following the termination of his employment.
(ii) During any period that the Executive is totally disabled such that
he is unable to perform his obligations hereunder by reasons involving physical
or mental illness or physical injury, as 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
-5-
6
physician shall be borne by the Company. Notwithstanding the foregoing, if the
Executive has been unable to perform his obligations hereunder by 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 obligation to make salary, bonus and other
payments to the Executive, to issue Bonus Stock to the Executive, and to provide
to him any other benefits which may be expressly required under this Agreement
during the remainder of his employment and following the termination of his
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 of 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. Any such
termination of employment by Executive, shall, except as otherwise expressly
provided in this Agreement, terminate the Company's obligations to make salary,
bonus, and other payments to the Executive, to issue any further Bonus Stock to
the Executive, and to provide other benefits to him following such termination.
As used herein, a "Good Reason" shall mean any of the following:
(A) Failure of the Board to elect the Executive as President and Chief
Executive Officer of the Company, or his removal from the office of President
and Chief Executive Officer of the Company, 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) or for Disability in
accordance with Section 5(b) and provided further that any notice of termination
hereunder shall be given by the Executive within ninety (90) days of such
failure or removal.
(B) Material change by the Company in the Executive's authority,
functions, duties or responsibilities as 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
-6-
7
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, 8, 19 or 20 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
payment and 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 non-conformance 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.
As used herein, a "Change of Control" means that any of the following
events has occurred:
(I) Any person (as defined in Section 3(a)(9) of the 1934 Act (or any
successor provision), other than Southwest Royalties Holdings, Inc. or its
Affiliates (hereinafter defined), the Company, or Enron or its Affiliates, is
the beneficial owner directly or indirectly of more than fifty percent (50%) of
the outstanding Common Stock of the Company, determined in accordance with Rule
13d-3 under the 1934 Act (or any successor provision), or otherwise becomes
entitled to vote more than fifty percent (50%) of the voting power entitled to
be cast at elections for directors ("Voting Power") of the Company, or in any
event such lower percentage as may at any time be provided for in any similar
provision for any director or officer of the Company or of any subsidiary
approved by the Board;
(II) If the Company is subject to the reporting requirements of Section
13 or 15(d) (or any successor provision) of the 1934 Act, any person (as defined
in Section 3(a)(9) of the 1934 Act), other than Southwest Royalties Holdings,
Inc. or its Affiliates, the Company, or Enron or its Affiliates shall purchase
shares pursuant to a tender offer or exchange offer to acquire Common Stock of
the Company (or securities convertible into or exchangeable for or exercisable
for common stock) for cash, securities or any other consideration, provided that
after consummation of the offer, the person in question is the beneficial owner,
directly or indirectly, of more than fifty percent (50%) of the outstanding
Common Stock of the Company, determined in accordance with Rule 13d-3 under the
1934 Act (or any successor provision) or such lower percentage as may at any
time be provided
-7-
8
for in any similar provision for any director or officer of the Company or of
any subsidiary approved by the Board;
(III) The stockholders or the Board shall have approved any
consolidation or merger of the Company in which (1) the Company is not the
continuing or surviving corporation unless such merger is with an entity at
least eighty percent (80%) of the Voting Power of which is held by the Southwest
Royalties Holdings, Inc. or its Affiliates, the Company, or Enron or its
Affiliates; or (2) the holders of the Company's shares of Common Stock of the
Company immediately prior to such merger or consolidation would not be the
holders immediately after such merger or consolidation of at least a majority of
the Voting Power of the Company or such lower percentage as may at any time be
provided for in any similar provision for any director or officer of the Company
or of any Subsidiary approved by the Board; or
(IV) The Company shall have consummated any sale, lease, exchange or
other transfer (in one transaction or a series of transactions) of all or
substantially all of the assets of the Company.
As used in this Agreement, "Common Stock" means the common stock of the
Company as it shall be constituted from time to time entitling the holders
thereof to share generally in the distribution of all assets available for
distribution to the Company's stockholders after the distribution to any holders
of capital stock with preferential rights.
(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 for a
Good Reason or (B) the Company other than for Cause, the Executive, in addition
to any other benefits provided for in this Section 5, shall be entitled
immediately to any remaining unpaid portion of the Commencement Bonus and, in
addition, to severance compensation in an aggregate amount equal to the product
of (I) one-twelfth of his Base Salary times (II) the lesser of (A) thirty-six
(36) or (B) the number of full calendar months remaining in the Employment
Period but for such termination, payable in substantially equal monthly
installments (in the number determined under Part (II) of the formula
immediately above) commencing 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 of Control or is terminated by the Company
other than for Cause in anticipation of a Change of Control, the severance
compensation referred to above shall be payable 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 any other benefits provided for in this Section 5, to severance
compensation in an aggregate amount equal to the product of (A) one-twelfth of
his Base Salary times (B) the lesser of (I) eighteen (18) or (II) the number of
full calendar months remaining in the Employment Period but for such
termination, payable in substantially equal monthly
-8-
9
installments (in the number determined under Part (B) of the formula immediately
above) commencing 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.
(e) Effect of Termination or Change of 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, or in the event the Executive
should terminate his employment for Good Reason, then, effective upon the date
such termination is effective, the Executive shall be entitled to immediately
receive any Bonus Stock then remaining unissued under Section 3.
(ii) In the event the Executive's employment hereunder is terminated by
the Company for Cause, then effective upon the date such termination is
effective, any Bonus Stock then remaining unissued by the Company to the
Executive under Section 3 shall be automatically forfeited by the Executive.
Additionally, if such termination is due to an Employment Prohibiting Order, the
Executive shall likewise automatically forfeit and relinquish to the Company any
Bonus Stock theretofore issued by the Company to or in favor of the Executive.
(iii) In the event of the Executive's death while employed or in the
event that the Executive's employment should terminate as a result of
Disability, then any Bonus Stock then remaining unissued for the year (and only
for the year) in which such death or Disability occurs shall be issued to the
Estate of the Executive, with forfeiture of rights to any unissued Bonus Stock
in ensuing years.
(f) Continuation of Benefits etc.
(i) Subject to Section 5(f)(ii) hereof, in the event that Executive's
employment hereunder is terminated by the Executive for a Good Reason or by the
Company other than for Cause, 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 at the Company's expense for a period of time following the
termination date ending on the first to occur of (I) April 30, 2004, (II) the
third anniversary of the termination date or (III) 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
-9-
10
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.
(ii) In the event the Executive's employment is terminated following a
Change of Control or is terminated by the Company other than for Cause in
anticipation of a Change of Control, the Company shall pay to the Executive, in
lieu of providing the benefits 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 earlier of (I) April 30, 2004 or (II) the third
anniversary of the termination date, which amount shall be paid in one lump sum
on the date of such termination.
(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 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 Commencement Bonus in
Section 2(b) and the Annual Incentive Bonus in Section 2(c), 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 such Subsidiary) may otherwise
agree.
6. Limitation on Competition. During the Employment Period and for a period of
three (3) years thereafter, in the event of termination of the Executive's
employment hereunder for any reason other than (a) following a Change of
Control, or (b) by the Executive for a Good Reason or (c) by the Company other
than for Cause, (i) the Executive shall not, directly or indirectly, without
prior written consent of the Board, participate or engage in, whether as a
director, officer, employee, advisor, consultant, stockholder, partner, joint
venturer, owner or in any other capacity (other than as an outside attorney or
investment banker), in the business of operating oil and gas pulling units or
workover rigs or of completing, servicing, maintaining, or repairing oil and gas
xxxxx, or
-10-
11
removing, transporting, or disposing of liquid wastes produced therefrom in
competition with the Company or any of its Subsidiaries in any county in the
United States in which the Company or any Subsidiary has conducted business
during the Employment Period (a "Competing Enterprise"); provided, however, that
the Executive shall not be deemed to be participating or engaging in any such
business solely by virtue of his ownership of not more than five percent (5%) of
any class of stock or other securities which are publicly traded on a national
securities exchange or in a recognized over-the-counter market; and (ii) the
Executive shall not, directly or indirectly solicit, raid, entice or otherwise
induce any employee of the Company or any of its Subsidiaries to be employed by
a Competing Enterprise.
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 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 Shareholder Agreement 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 change of address, which will not be effective until receipt, and
except as otherwise provided in Section 5(a).
-11-
12
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 Effective as of the Commencement Date, this
Agreement, together with the exhibits and schedules hereto and any other written
agreements, 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.
-12-
13
15. Governing Law. This Agreement will be governed and construed in accordance
with the law of Texas 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,
8, 19, 20 and 21 hereof and the Shareholder Agreement shall survive the
termination of the Executive's employment as continuing and separate agreements
between the parties; provided, however, that a termination pursuant to Section
21 shall automatically terminate and extinguish all rights and obligations of
the parties under this Agreement.
17. Certain Definitions. As used herein, (a) the term "Subsidiaries" shall mean
all corporations in which a majority of the capital stock entitling the holder
thereof to vote is owned by the Company or a Subsidiary; and (b) the term
"Affiliates" shall mean any person, corporation, subsidiary, partnership, or
other business entity which, whether directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, any
applicable entity.
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.
19. Certain Representations, Warranties, and Covenants.
(a) As a material inducement to the Company to employ the Executive
hereunder, and as representations, warranties, and covenants which shall survive
any termination of this Agreement, the Executive represents, warrants, and
covenants to and with the Company that (i) the Employment Agreement (the "Key
Employment Agreement") dated December 15, 1998, between the Executive and Key
Energy Group, Inc. ("Key") and the exhibits thereto, and the Policy Regarding
Acquisition, Ownership and Disposition of Company Securities of Key (the "Key
Policy"), copies of which have been provided to the Company, are all contracts
or agreements, whether written or oral, between such parties relating to the
Executive's employment by Key and have not been modified, supplemented, or
amended in any respect, (ii) the Executive has not misrepresented and, for the
duration of his employment with Key, will not misrepresent, to Key in any
material respect any aspect of the negotiations and dealings between the
Executive and the Company leading up to this Agreement,(iii) this Agreement and
the Executive's performance of his duties hereunder do not and will not conflict
with, violate, or constitute a breach of any other contracts or agreements,
whether written or oral, to which the Executive is a party or by which he is
bound, including, without limitation, the Key Employment Agreement and the Key
Policy, and (iv) the Executive will indemnify and hold the Company harmless from
and against any and all lawful claims and causes of action (including reasonable
attorneys' fees and other expenses of litigation) asserted and ultimately
established against the Company by third parties arising from, based upon, or
due to the breach or inaccuracy of any of the foregoing representations,
warranties, and covenants of or by the Employee.
-13-
14
(b) As a material inducement to the Executive to accept employment by
the Company hereunder, and as representations, warranties, and covenants which
shall survive any termination of this Agreement, the Company, in reliance upon
the foregoing representations, warranties, and covenants of the Executive,
represents, warrants, and covenants to and with the Executive that: (i) this
Agreement and the Company's performance of its duties have been duly and
properly authorized by all necessary corporate action on the part of the Company
and do not and will not conflict with, violate, or constitute a breach of any
other contracts or agreements, whether written or oral, to which the Company is
a party or by which he is bound, (ii) the Company has not asked and will not ask
or expect the Executive to use or disclose in his employment under this
Agreement any trade secrets or other confidential information of his prior
employers (including, without limitation, Key) that is prohibited from use or
disclosure under applicable law, and (iii) the Company will indemnify, defend,
and hold the Executive harmless from and against any and all claims and causes
of action (including reasonable attorneys' fees and other expenses of
litigation) asserted by third parties against the Executive arising from, based
upon, or due to (A) the breach or inaccuracy of any of the foregoing
representations, warranties, and covenants of or by the Company or (B) the
establishment of an employment relationship between the Executive and the
Company pursuant to this Agreement.
(c) In the event of any claim, demand, suit, or proceeding involving a
third party with respect to which indemnity may be sought by one party to this
Agreement (for purposes of this Section, the "Indemnified Party") against the
other (for purposes of this Section, the "Indemnifying Party"), the Indemnified
Party will give proper written notice thereof to the Indemnifying Party, which
shall state specifically the representation, warranty, covenant, or agreement
with respect to which indemnification is sought, and the Indemnifying Party
shall within fifteen (15) days of the receipt of such notice by registered or
certified mail advise the Indemnified Party of the extent, if any, to which it
will contest the same (which it shall be entitled to do at its own expense
through representatives of its own choice). The Indemnifying Party will not, in
defense of any such claim, demand, suit or proceeding, except with the prior
written consent of the Indemnified Party, consent to the entry of any judgment
or enter into any settlement that does not include, as an unconditional term
thereof, the giving by the claimant or the plaintiff to the Indemnified Party of
a release from all liability in respect thereof. The Indemnified Party may, but
shall not be required to, at its expense, join in such contest through
representatives of its own choice. To the extent that the Indemnifying Party:
(i) fails to give such advice within the fifteen (15) day
period aforesaid;
(ii) advises that it will not contest such claim, demand,
suit, or proceeding; or
(iii) fails to contest such claim, demand, suit, or
proceeding, promptly, diligently, and in good faith,
the Indemnified Party shall have the right at its
discretion, to pay, compromise, or defend the same
and, as to such claim, the Indemni fied Party shall
be indemnified in full by the Indemnifying Party on
demand as incurred with respect to out-of-pocket
expenses incurred by the Indemnified Party and, to
the extent not paid directly to such third parties by
-14-
15
the Indemnifying Party, on demand at the time of
payment by the Indemnified Party to such third
parties. If the Indemnifying Party disputes its
liability with respect to a claim or an amount
thereof, then such dispute shall be settled pursuant
to the mediation and arbitration procedures set forth
in Section 20 of this Agreement.
20. Mediation and Arbitration. (a) Any dispute between the Company and
the Executive arising under or in connection with, concerning, or relating to
this Agreement shall be resolved under the mediation and binding arbitration
procedures outlined in this Section 20. The parties will first attempt in good
faith to resolve all disputes by negotiations between persons having authority
to settle the controversy. If any party believes further negotiations are
futile, such party may initiate the mediation process by so notifying the other
party in writing. The parties shall then attempt in good faith (and employing
persons with authority to settle the controversy) to resolve the dispute by
mediation in Midland, Texas in accordance with the Center for Public Resources
Model Procedure for Mediation of Business Disputes, as such procedure may be
modified by written agreement of the Parties.
(b) If the dispute has not been resolved pursuant to mediation within
sixty (60) days after initiating the mediation process, the dispute shall be
finally resolved through binding arbitration. The arbitration proceeding shall
be held in Midland, Texas, shall be governed by Texas law, and shall be
conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association ("AAA"). The arbitration shall be before a three-person
panel of neutral arbitrators, consisting of persons from any of the following
categories: (i) attorneys having practiced in the area of commercial law for at
least ten (10) years; and (ii) retired judges at the United States District
Court or a Texas or United States appellate court level. The AAA shall submit a
list of persons meeting the criteria outlined above and the parties shall select
the arbitration panel from the list in the manner established by the AAA. The
arbitrators shall conduct a hearing no later than thirty (30) days after
submission of the matter to arbitration and a decision shall be rendered by the
arbitrators within thirty (30) days of the hearing. At the hearing the parties
shall present such evidence and witnesses as they may choose, with or without
counsel. Adherence to formal rules of evidence shall not be required, but the
arbitration panel shall consider any evidence and testimony which it deems to be
relevant, in accordance with the procedures that it determines to be
appropriate. Any award entered in the arbitration shall be made within fifteen
(15) days of the arbitrators' decisions. The final decision of the arbitrators
shall be binding upon the parties and non-appealable, may be filed in any court
of competent jurisdiction and enforced by any party as a final judgment of such
court, and may include such award of costs and attorneys' fees as the
arbitrators determine appropriate.
21. Special Contingency. Any provisions of this Agreement to the
contrary notwithstanding, the Company and the Executive expressly agree that,
if, for any reason, the instruments and documents effectuating the Enron Loan
Modification shall not have been fully executed and delivered by the
Commencement Date, this Agreement shall automatically terminate and neither the
Company nor the Executive shall have any further rights, obligations, or
liabilities hereunder.
-15-
16
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
SIERRA WELL SERVICE, INC.
By: /s/ Xxxx X. Xxxxxx
--------------------------------
Printed Name: Xxxx X. Xxxxxx
----------------------
Title: Vice President
-----------------------------
/s/ XXXXXXX X. XXXXXXX
-----------------------------------
XXXXXXX X. XXXXXXX
-16-
