XXXXX X. XXXXXXXXXX EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (as from time to time amended in accordance with
the provisions hereof, this "Agreement"), is entered into as of the 31st day of
December, 2001, by and between XXXXX X. XXXXXXXXXX, residing at 0 Xxxxxx Xxxxx,
Xxxxxxx, Xxxxx 00000 (the "Executive"), and KEY ENERGY SERVICES, INC., a
Maryland corporation with executive offices at 000 Xxxxx Xxxxx Xxxx, Xxx Xxxx,
Xxxxxxxxxxxx 00000 (the "Company").
WHEREAS, the Executive has been employed by the Company as its Executive
Vice President--Domestic Operations pursuant to a prior written employment
agreement;
WHEREAS, the Chief Executive Officer of the Company (the "Chief Executive
Officer") and the Board of Directors of the Company (the "Board") are each of
the view that obtaining a commitment from the Executive to continue to serve in
his capacities as Executive Vice President--Domestic Operations until June 30,
2004 is essential to the continued growth and success of the Company and is in
the best interests of the Company and its shareholders;
WHEREAS, the Company desires to enter into this written Employment Agreement
with the Executive, effective as of January 1, 2002 (the "Commencement Date");
and
WHEREAS, the Executive is willing to serve as the Company's Executive Vice
President and Chief Operating Officer pursuant to the terms and conditions set
forth herein, effective as of the Commencement Date.
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 Company hereby agrees to
employ the Executive, and the Executive hereby accepts employment by the
Company, as the Company's Executive Vice President and Chief Operating Officer,
and the Executive shall hold such position and continue employment with the
Company hereunder until the close of business on June 30, 2004, unless sooner
terminated in accordance with Section 5 hereof (the "Initial Employment
Period"). The above notwithstanding, at the close of business on each June 30,
commencing with June 30, 2004, the term of the Executive's employment hereunder
shall be automatically extended for twelve (12) months (unless sooner terminated
in accordance with Section 5 hereof) unless either the Executive or the Company
shall have given written notice (in each case, a "Non-Renewal Notice") to the
other that such automatic extension shall not occur, which Non-Renewal Notice
shall have been given no later than ninety (90) days prior to the relevant
June 30 (the Initial Employment Period, together with any extensions, until
termination in accordance herewith, is referred to hereby as the "Employment
Period").
(b) The Executive shall have the responsibilities, duties and authority
commensurate with his positions as the Executive Vice President and Chief
Operating Officer of the Company, including without limitation the general
supervision and control over, and responsibility for, the
overall legal activities of the Company and its subsidiaries, and such other
responsibilities, duties, functions and authority as the Board, the Chief
Executive Officer or the President of the Company (the "President") shall from
time to time designate which do not effect a material decrease in the
responsibilities, importance, scope or dignity of the Executive's position with
the Company compared with those of such position as of the Commencement Date,
subject, however, to the supervision of the Board and either the Chief Executive
Officer or the President of the Company (the "President"). The Executive will
report only to the Board and either the Chief Executive Officer or the
President.
(c) The Executive will devote his full time and his best efforts to the
business and affairs of the Company; 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.
Reference is made to Section 6 hereof, which contains limitations on some of the
above activities.
(d) The principal location at which the Executive will substantially perform
his duties will be the Company's principal executive offices located at 0 Xxxxx
Xxxxx, Xxxxxxx, Xxxxx 00000. In the event the Company's principal executive
offices are moved from their current location, the Company will pay to the
Executive (i) ordinary and reasonable realtor fees and closing costs incurred in
connection with the sale of the Executive's primary residence, (ii) ordinary and
reasonable closing costs incurred in connection with the purchase of the
Executive's new primary residence in the vicinity of the Company's new principal
executive offices, (iii) ordinary and reasonable costs incurred to pack,
transport, unpack, and insure the Executive's household furnishings and effects
to his new primary residence, (iv) ordinary and reasonable fees for connecting
utilities in his new primary residence, (v) ordinary and reasonable costs for
trips to look for a new residence as well as up to thirty (30) days of temporary
housing, and (vi) a cash bonus calculated to pay all of the federal, state and
local income and payroll taxes which the Executive will incur, if any, as a
result of (A) the Company's reimbursement of the preceding expenses and (B) the
amount of such bonus (that is, a "gross-up" bonus).
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 Seventy-Five Thousand Dollars
($275,000) 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; provided, however, that the Base Salary shall be
not less than Three Hundred Forty Thousand Dollars ($340,000) on and after
July 1, 2002 if the Executive shall continue to be employed hereunder on such
date. The Company will review the 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 Chief Executive Officer and the Board,
-2-
taking into account, among other factors, the Executive's performance and the
performance of the Company.
(b) For each six-month or other applicable period commencing on July 1, 2001
and thereafter, the Executive shall be eligible to participate in the Company's
Performance Compensation Plan or any successor 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 Compensation Committee of the Board (the "Compensation Committee") after
consultation with the Chief Executive Officer and the Executive, payable within
ninety (90) days after the end of such period. The performance goals for the
Performance Compensation Plan will be based on objective criteria specified in
good faith in advance by the Compensation Committee after consultation with the
Chief Executive Officer and the Executive. The Executive shall also receive such
bonuses other than pursuant to the Performance Compensation Plan in such amounts
and at such times as the Compensation Committee, after consultation with the
Chief Executive Officer, in its discretion determines are appropriate to
recognize extraordinary performance by the Executive.
(c) The Executive shall be reimbursed by the Company for reasonable travel,
lodging, meal, entertainment and other expenses incurred by him in connection
with performing his services hereunder in accordance with the Company's
reimbursement policies from time to time in effect.
3. STOCK OPTIONS.
The Executive shall be eligible to participate in awards of stock options,
at the discretion of the Board. 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 Compensation Committee after consultation with
the Executive and the Chief Executive Officer.
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 A
hereto.
(b) The Executive shall be entitled to no less than the number of vacation
days in each fiscal year determined in accordance with the Company's vacation
policy as in effect from time to time, but not less than twenty (20) days in any
fiscal 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
fiscal 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.
-3-
(c) 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; provided,
however, that the maximum aggregate amount paid by the Company pursuant to this
Section 4(d) shall not exceed $15,000 in any fiscal year of the Company.
(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.
(e) The Company shall pay the initiation fee and any other initial
membership fee for the Executive to become and remain a member of one private
country club, golf club, tennis club or similar club or association for business
use selected by the Executive and approved by the Company, which approval shall
not be unreasonably withheld or delayed. In addition, the Company shall pay all
annual or other periodic fees, dues and costs, for the Executive's membership in
such club or association.
5. TERMINATION, CHANGE IN CONTROL AND REASSIGNMENT OF DUTIES.
(a) TERMINATION BY THE COMPANY. The Company shall have the right to
terminate the Executive's employment under this Agreement and the Employment
Period for Cause (as defined below) at any time without obligation to make any
further payments to the Executive hereunder except the compensation described in
Section 5(g) hereof. Except as otherwise provided in Section 5(b) hereof, which
Section shall apply in the event the Executive becomes unable to perform his
obligations hereunder by reason of Disability (as defined below), the Company
shall have the right to terminate the Executive's employment hereunder and the
Employment Period for any reason other than for Cause (including, without
limitation, by giving the Executive a Non-Renewal Notice pursuant to
Section 1(a) hereof) only upon at least ninety (90) days prior written notice to
him (provided that, in the event the Company gives the Executive a Non-Renewal
Notice pursuant to Section 1(a) hereof, only the 90-day notice period therein
provided shall be required). In the event the Company terminates the Executive's
employment hereunder for any reason other than for Disability or Cause
(including, without limitation, by giving the Executive a Non-Renewal Notice
pursuant to Section 1(a) hereof), 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 and to provide other
benefits to him during the remainder of his employment and, if applicable,
following the termination of 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 his
incapacity due to physical or mental illness or
-4-
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 a written 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 the Executive
of a felony by a court of competent jurisdiction; or (iv) willful violation of
the Key Energy Services, Inc. Amended and Restated Policy Regarding Acquisition,
Ownership and Disposition of Company Securities, as amended from time to time.
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 otherwise cure such damage, and he has not done so (provided that only one
such period needs to be provided in any period of three (3) consecutive months);
(B) an opportunity shall have been provided for the Executive 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, if applicable) he was guilty of conduct set forth in
clause (i) or (ii) above.
(b) TERMINATION UPON DISABILITY AND TEMPORARY REASSIGNMENT OF DUTIES DUE TO
DISABILITY; TERMINATION UPON DEATH
(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 during the Employment Period,
or (B) for an aggregate of ninety (90) days during any period of twelve (12)
consecutive months during the Employment Period ("Disability"), then the
Executive's employment hereunder and the Employment Period 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 and to provide other benefits to him, during the
remainder of his employment and, if applicable, 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 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
-5-
perform his obligations hereunder prior to the Company's termination of the
Executive's employment hereunder and the Employment Period in accordance with
the terms of this Agreement, 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 by reasons involving physical or mental
illness or physical injury for a period of ninety (90) consecutive days during
the Employment Period or an aggregate of ninety (90) days during any period of
twelve (12) consecutive months during the Employment Period, 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 and to
provide other benefits to him under this Agreement during his employment or, if
applicable, following a termination of employment.
(iii) The Executive's employment hereunder and the Employment
Period shall automatically terminate immediately upon the death of the
Executive.
(c) TERMINATION BY EXECUTIVE. The Executive's employment hereunder and the
Employment Period may be terminated by the Executive by giving written notice to
the Company as follows: (i) at any time for any reason other than Good Reason
(including, without limitation, by giving the Company a Non-Renewal Notice
pursuant to Section 1(a) hereof) by notice of at least ninety (90) days
(provided that, in the event the Executive gives the Company a Non-Renewal
Notice pursuant to Section 1(a) hereof, only the 90-day notice period therein
provided shall be required); or (ii) at any time for Good Reason, effective upon
giving notice of such. 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:
(1) Failure of the Board to elect the Executive as Executive Vice President
and Chief Operating Officer of the Company, or removal from the office of
Executive Vice President and Chief Operating Officer of the Company provided
that such failure or removal is not in connection with a termination of the
Executive's employment hereunder by the Company for Cause (in accordance with
Section 5(a) hereof), for Disability (in accordance with Section 5(b) hereof) or
other than for Cause or Disability (in accordance with Section 5(a) hereof and
including, without limitation, by giving the Executive a Non-Renewal Notice
pursuant to Section 1(a) hereof), and provided further that any notice of
termination hereunder shall be given by the Executive within ninety (90) days of
such failure or removal; or
(2) Material change by the Company in the Executive's authority, functions,
duties or responsibilities as Executive Vice President and Chief Operating
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 materially less responsibility, importance, scope or
dignity than his position as of the Commencement Date, provided that such
material change is not in connection with a termination of Executive's
employment hereunder by the Company for Cause (in accordance with Section 5(a)
hereof), for Disability (in accordance with Section 5(b) hereof) or other than
for Cause or Disability (in accordance with Section 5(a) hereof) (including,
without limitation, by giving the Executive a Non-Renewal Notice pursuant
-6-
to Section 1(a) hereof), or is otherwise permitted by Section 5(b)(ii) hereof;
and provided, further, that any notice of termination hereunder shall be given
by the Executive within ninety (90) days of when he becomes aware of such
change; or
(3) Failure by the Company to comply with any provision of Section 1(d), 2
or 4 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; or
(4) Failure by the Company to obtain an assumption of this Agreement (by
operation of law or in writing) by a successor in accordance with Section 16
hereof unless payment or provision for payment and provision for continuation of
benefits under this Agreement have been made as required by Section 16 hereof;
or
(5) 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; or
(6) At the Executive's election at any time following, but prior to the
first anniversary of, a Change in Control (as defined below), effective upon
giving such notice; or
(7) If the Company shall require that the Executive relocate outside of the
Midland, Texas area, provided any notice of termination hereunder shall be given
by the Executive within thirty (30) days of receipt of notice of such required
relocation.
As used herein, the term "CHANGE IN CONTROL" shall have the meaning ascribed
to such term in Exhibit B hereto.
(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 Good Reason or (B) by the Company other than for Cause or Disability
(including, without limitation, by giving the Executive a Non-Renewal Notice
pursuant to 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 (3) times his Base Salary at
the rate in effect on the termination date, payable in thirty-six (36)
substantially equal monthly installments commencing at the end of the calendar
month in which the termination date occurs; provided, however, that if the
Executive's employment is terminated within one (1) year following a Change in
Control (other than a termination because of the Executive's death) or is
terminated by the Company other than for Cause or Disability (including,
without limitation, by giving the Executive a Non-Renewal notice pursuant to
Section 1(a) hereof) in anticipation of a Change in
-7-
Control, the severance compensation payable to the Executive (i) shall be
increased by an amount equal to three (3) times the average annual total bonuses
paid by the Company to the Executive during the three-year period (or such
shorter period as the Executive may have been employed by the Company) preceding
the date on which the notice of termination is given and (ii) shall be payable
in one lump sum on the effective date of such termination; and provided,
further, that if the Executive's employment is terminated within one (1) year
following a Change in Control for Disability, the Executive must return to the
Company any disability insurance proceeds actually paid to the Executive or for
his benefit during the three-year period following the effective date of such
termination (but only those proceeds from disability insurance provided by the
Company to the executive pursuant to Section 4(a) hereof).
(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 (3) times his Base
Salary at the rate in effect on the termination date, payable in thirty-six
(36) substantially equal monthly installments 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 (but only those proceeds from disability
insurance provided by the Company to the Executive pursuant to Section 4(a)
hereof).
(iii) CHANGE IN CONTROL FOLLOWING TERMINATION. In the event there
is a Change in Control after Executive's employment is terminated and while
Executive is entitled to severance compensation as described above, any such
severance compensation which remains unpaid as of the Change in Control shall
be paid in one lump sum as of the Change in Control.
(iv) TERMINATION FOR DEATH. In the event of the executive's death
during the Employment Period, the Executive's estate shall not be entitled to
any severance compensation.
(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 or Disability (including,
without limitation, by giving the Executive a Non-Renewal Notice pursuant to
Section 1(a) hereof), or in the event the Executive should terminate his
employment for Good Reason, then, unless the provisions of Section 5(e)(iv)
hereof shall apply, any restricted stock or options held by the Executive
entitling the Executive to retain or purchase securities of the Company which
have not vested prior to the effective date of such termination shall
immediately vest and shall remain exercisable until the earlier to occur of (x)
the third anniversary of the effective date of such termination and (y) the
final stated expiration date of the option or restricted stock. In addition, in
the event of such a termination, any options or restricted stock held by the
Executive entitling the Executive to retain or purchase securities of the
Company which have vested prior to the effective date of such termination and
(x) which constitute Extended Equity Incentives shall remain exercisable until
the earlier to occur of (1) the third anniversary of the effective date of such
termination and (2) the final stated expiration date of the option or
restricted stock and (y) which do not constitute Extended Equity Incentives
shall remain exercisable in accordance with the terms and provisions
-8-
of the plan and/or agreement under which they were awarded. As used herein, the
term "EXTENDED EQUITY INCENTIVES" shall mean options or restricted stock held by
the Executive entitling the Executive to retain or purchase securities of the
Company which either (A) have been granted (or, under generally accepted
accounting principles as in effect from time to time and as applied in the
financial statements of the Company, have been renewed, extended or otherwise
modified such that they are accounted for as if they had been granted, including
without limitation by virtue of accelerated vesting upon termination of the
Executive's employment hereunder) on or after the date of this Agreement or
(B) are not described in the immediately preceding clause (A) and have a
purchase or exercise price equal to at least $7.00 per share as of the date of
this Agreement.
(ii) In the event the Executive's employment hereunder is
terminated by the Company for Cause or is terminated by the Executive other
than for Good Reason (including, without limitation, by giving the Company a
Non-Renewal Notice pursuant to Section 1(a) hereof), then effective upon the
date such termination is effective, any restricted stock or options which have
not vested prior to the effective date of such termination shall be forfeited.
Any options or restricted stock held by the Executive entitling the Executive
to retain or purchase securities of the Company which have vested prior to the
effective date of such termination shall remain subject to the terms and
provisions of the plan and/or the agreement under which they were awarded.
(iii) In the event of the Executive's death while employed by the
Company or in the event that the Executive's employment should terminate as a
result of Disability, then, unless the provisions of Section 5(e)(iv) hereof
shall apply, any restricted stock or options held by the Executive entitling
the Executive to retain or purchase securities of the Company which have not
vested prior to the effective date of such termination shall immediately vest
and shall also remain exercisable until the earlier to occur of (x) the third
anniversary of the death of the Executive or the effective date of such
termination and (y) the final stated expiration date of the option or
restricted stock. In addition, in the event of such death or such a
termination, any options or restricted stock held by the Executive entitling
the Executive to retain or purchase securities of the Company which have vested
prior to the effective date of such death or termination and (x) which
constitute Extended Equity Incentives shall remain exercisable until the
earlier to occur of (1) the third anniversary of the effective date of such
death or termination and (2) the final stated expiration date of the option or
restricted stock and (y) which do not constitute Extended Equity Incentives
shall remain exercisable in accordance with the terms and provisions of the
plan and/or agreement under which they were awarded.
(iv) In the event of a Change in Control while the Executive is
employed by the Company, 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 entitling the Executive to retain or purchase securities of the
Company which have not vested prior to such date shall immediately vest and all
restricted stock and options held by the Executive shall remain exercisable in
accordance with the terms and provisions governing such restricted stock or
options; provided, however, that if the Executive's employment is terminated
for any reason within one (1) year following a Change in Control, all
restricted stock and options held by the Executive shall remain exercisable
until their respective final stated expiration dates. In the event that the
Executive's employment is terminated by the Company other than for Cause or
Disability
-9-
(including, without limitation, by giving the Executive a Non-Renewal Notice
pursuant to Section 1(a) hereof) in anticipation of a Change in Control, then as
of the date immediately prior to the date on which notice of such termination is
given, any restricted stock or options held by the Executive entitling the
Executive to retain or purchase securities of the Company which have not vested
prior to such date shall immediately vest and all restricted stock and options
held by the Executive shall remain exercisable until their respective final
stated expiration dates.
(v) In the event of a conflict between the terms and provisions of
this Section 5(e) and any other terms and provisions governing any restricted
stock or options held (now or in the future) by the Executive entitling the
Executive to retain or purchase securities of the Company (including without
limitation the terms and provisions contained in the agreements and/or plans
pursuant to which such restricted stock or options were (or will in the future
be) granted), the terms and provisions of this Section 5(e) shall control.
(f) CONTINUATION OF BENEFITS.
(i) Subject to Section 5(f)(ii) hereof, in the event that
Executive's employment hereunder is terminated by the Executive for Good Reason
or by the Company for Disability or other than for Cause (including, without
limitation, by giving the Executive a Non-Renewal Notice pursuant to Section
1(a) hereof) and not as a result of the death of the Executive, 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 (other than the
benefits provided under Section 4(b)hereof) at the Company's expense for a
period of time following the termination date ending on the first to occur of
(I) the date the Executive reaches the age of 65 years or (II) the date on
which the Executive commences full-time employment with 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 the day 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, into individually owned
policies, 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 hereunder is
terminated by the Company within one (1) year of a Change in Control (other
than a termination because of the Executive's death) 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
contemplated by Section 5(f)(i) above, an amount in cash equal to the aggregate
reasonable
-10-
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 date the Executive
would reach the age of 65 years, which amount shall be paid in one lump sum on
the date of such termination.
(iii) In the event the Executive's employment hereunder is
terminated by reason of death, the Executive's spouse and her dependents shall
be entitled for a period of time following his death ending on the date the
Executive would have reached the age of 65 years to receive coverage at the
Company's expense under the Company's group medical and dental plans at least
equivalent to the coverage the Executive was receiving as of the day
immediately preceding his death.
(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 (i) any
unpaid portion of his Base Salary through the effective termination date,
(ii) for any accrued but unused vacation (payable in an amount equal to the Base
Salary divided by 255 and multiplied by the number of accrued but unused
vacation days), (iii) any prior fiscal year bonus earned but not paid,
(iv) provided that the Executive's employment was not terminated by the Company
for Cause or was terminated by the Executive Good Reason, a pro-rata portion
(based upon the number of days of employment during the fiscal year) of any
bonus for the current fiscal year, so long as (A) the performance goals required
to be achieved in order to earn such bonus had been established and (B) it is
reasonably likely that such goals would have been achieved had the Executive
remained employed with the Company for the remainder of the fiscal year,
(v) 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, including without limitation any sums due under
Sections 2(c), 4(c) and 4(d) hereof, and (vi) any Gross-Up Payment which may
become due under the terms of Section 5(i) hereof. Such amounts shall be paid
within ten (10) days of the termination date.
(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 may otherwise agree.
(i) CERTAIN TAX CONSEQUENCES.
(i) 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, as defined in section 280G of the Code (a
"Statutory Change in Control"), 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 Code, the Company shall pay to
the Executive an additional amount equal to the Excise Tax, plus any amount
necessary to "gross up" the Executive for additional taxes resulting from the
payments to the Executive by the Company under this Section 5(i)(i) (the
"Excise Tax
-11-
Payment"). Each Excise Tax Payment shall be made not less than five
(5) business days prior to the due date for payment of the Excise Tax.
(ii) For purposes of determining whether any of the Severance
Benefits will be subject to the Excise Tax and the amount of such Excise Tax:
(A) all of the Severance Benefits shall be treated as "parachute
payments" within the meaning of Code section 280G(b)(2) if the aggregate
present value (determined as provided in Code Section 280G(d)(4)) of such
Severance Benefits equals or exceeds three times the Executive's "Base
Amount" (within the meaning of Code Section 280G(b)(3)), and all "excess
parachute payments" within the meaning of Code section 280G(b)(1) shall be
treated as subject to the Excise Tax, unless the Executive receives a
written opinion from Ropes & Xxxx or other tax counsel selected by Ropes &
Xxxx and reasonably acceptable to the Executive or in the event Ropes & Xxxx
is unable or unwilling to make such selection, by other tax counsel selected
by the Company and reasonably acceptable to the Executive, that 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
(B) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by a certified public accountant or appraisal
company of recognized national standing selected by Ropes & Xxxx and
reasonably acceptable to the Executive, or in the event that Ropes & Xxxx is
unable or unwilling to make such selection, such selection shall be made by
such other certified public accountant or appraisal company of recognized
national standing 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).
(iii) In the event that the Excise Tax is subsequently determined
to be less than the amount taken into account hereunder, the Executive shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined (the "Reduced Excise Tax"), an amount (the "Gross-Up
Repayment") equal to the sum of (A) the difference of the Excise Tax Payment
and the Reduced Excise Tax PLUS (B) an amount representing the difference
between (1) the amount paid by the Company to the Executive to "gross up" the
Executive for taxes on payments made by the Company to the Executive in respect
of the Excise Tax and (2) the amount which should have been paid to the
Executive by the Company to "gross up" the Executive for taxes on payments made
by the Company to the Executive in respect of the Reduced Excise Tax; provided,
however, that in no event shall the Gross-Up Repayment exceed the actual
aggregate cash refunds of, or cash reductions in, taxes paid by the Executive
by virtue of paying the Gross-Up Repayment; and provided, further, that if such
refunds or reductions are realized from time to time, the Executive shall make
a repayment to the Company at the time of each such realization equal to the
excess of the Gross-Up Repayment due after giving effect to such realization
over the Gross-Up Repayment due immediately prior to giving effect to such
realization. The Executive shall (1) take such actions with respect to taxes
and tax returns as the
-12-
Company may from time to time request in order to obtain such refunds and
reductions, including, without limitation, by taking positions on tax returns
and filing amended tax returns, (2) provide the Company with copies of all tax
returns filed by the Executive which reflect such refunds or reductions or are
otherwise requested by the Company in order to determine the Executive's
compliance with the immediately preceding clause (1), (3) permit the Company to
participate in any proceedings relating to such refunds and reductions and
(4) take all such other actions as may be reasonably requested by the Company
from time to time in connection with the realization of such refunds or
reductions, including, without limitation, borrowing money from the Company (on
terms and conditions reasonably satisfactory to the Executive and the Company,
including, without limitation, having the Company make the Executive whole, on
an after-tax basis, for any interest costs) so that the payments made from time
to time by the Executive to the Company hereunder maximize (to the extent
reasonably possible) such refunds and reductions, the aggregate amount of such
payments by the Executive not to exceed the Gross-Up Repayment (computed without
regard to the provisos to the first sentence of this Section 5(i)(iii));
provided, however, that the Company shall bear and directly pay, or shall
promptly reimburse the Executive for, all costs and expenses (including any
additional penalties and interest) incurred by the Executive in connection with
any actions taken or omitted by the Executive in accordance with instructions
from the Company pursuant to this sentence, and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax
(including any additional penalties and interest) imposed as a result of the
Company's payment of such costs and expenses. In the event that the Excise Tax
is subsequently determined to exceed the amount taken into account hereunder
(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 (together with 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.
(iv) The Executive shall give the Company written notice of any
determination by the Executive, or any claim by any taxing authority, that he
owes Excise Tax on any Severance Benefit. Such notice shall be given as soon as
practicable but no later than ten (10) business days after the Executive makes
such determination or is informed of such claim, and shall, to the extent
Executive has or may reasonably obtain such information, apprise the Company of
the amount of such Excise Tax and the date on which it is required to be paid.
If the Company gives the Executive written notice at least thirty (30) days
prior to the due date for payment of such Excise Tax, or within ten (10)
business days of having received the foregoing notice from the Executive
(whichever is later), that it disagrees with or wishes to contest the amount of
the Excise Tax, the Company and the Executive shall consult with each other and
their respective tax advisors regarding the amount and payment of any Excise
Tax. In the event there is a contest with any taxing authority regarding the
amount of the Excise Tax, the Company shall bear and pay directly all costs and
expenses (including additional interest, penalties and legal fees) incurred in
connection with any such contest, and shall indemnify and hold the Executive
harmless, on an after-tax basis, to the extent not otherwise paid hereunder, on
(x) the
-13-
Excise Tax Payment (including any interest and penalties with respect thereto)
and (y) the Company's payment of the Executive's costs and expenses hereunder.
(v) As used herein, any reference to "Ropes & Xxxx" shall include
any successor firm thereto.
6. LIMITATION ON COMPETITION.
During the Employment Period, and for such period thereafter (A) as the
Executive is entitled to receive severance compensation under this Agreement, or
(B) in the event payment of the Executive's severance compensation is
accelerated due to a Change in Control, for a period of three (3) years
following the end of the Employment Period, or (C) in the event the Executive's
employment is terminated by the Company for Cause or the Executive terminates
his employment for any reason other than Good Reason (including, without
limitation, by giving the Company a Non-Renewal Notice pursuant to Section 1(a)
hereof), for a period of twelve months following the Employment Period:
(a) the Executive shall not, directly or indirectly, without the
Company's prior written consent, participate or engage in, whether as a
director, officer, employee, advisor, consultant, investor, lender,
stockholder, partner, joint venturer, owner or in any other capacity, any
Competitive Business (as defined below) conducted in any Competitive Market
Area (as defined below); 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 of any class of stock or other
securities which is publicly traded on a national securities exchange or in a
recognized over-the-counter market;
(b) the Executive shall not, without the Company's prior written consent,
(i) solicit (other than by way of generalized employment advertising undertaken
in the ordinary course of business) the service of or employ any management
employee of the Company for the Executive's own benefit or for the benefit of
any person or entity other than the Company, (ii) induce any such employee to
leave employment with the Company, or (iii) employ or cause any other person
or entity other than the Company to employ any former management employee of
the Company whose termination of employment with the Company occurred less
than six (6) months prior to such employment by the Executive or such other
person or entity; and
(c) the Executive shall not, without the Company's prior written consent,
(i) induce or attempt to induce any customer, supplier or contractor of the
Company to terminate or breach any agreement or arrangement with the Company
or otherwise to cease doing business with the Company, or (ii) induce or
attempt to induce any customer, supplier or contractor of the Company
(including any prospective customer, supplier or contractor which the Company
is actively pursuing prior to the Executive's termination of employment), not
to enter into any agreement or arrangement with the Company or not to do
business with the Company.
-14-
As used herein, the term "COMPETITIVE BUSINESS" shall mean any business:
(1) that is competitive with any business (A) which was conducted by the Company
or any of its affiliated companies during the Employment Period or on the date
of termination of Executive's employment hereunder or (B) which, on the date of
such termination or during the twelve months immediately preceding such
termination, the Company or any of its affiliated companies was actively
investigating with a view to conducting or was actively pursuing a plan to
conduct; and (2) from which the Company and such affiliated companies derive (or
reasonably expect to derive) annual revenues of not less than $1,000,000. As
used herein, the term "COMPETITIVE MARKET AREA" shall mean any geographic market
area (1) if the Company or any of its affiliated companies conducted business in
such geographic market area during the Employment Period or on the date of
termination of Executive's employment hereunder, or (2) if, on the date of such
termination or during the twelve months immediately preceding such termination,
the Company or any of its affiliated companies was actively investigating with a
view to conducting business in such geographic market area or was actively
pursuing a plan to conduct business in such geographic market area.
The Executive agrees and acknowledges that a portion of the consideration to
be paid by the Company to the Executive pursuant to this Agreement is in
consideration of the covenants under this Section 6 and that such consideration
is fair and adequate, even though the Executive will not receive any severance
compensation in the event he terminates his employment with the Company other
than for Good Reason or the Company terminates his employment for Cause. The
Executive acknowledges and agrees that any breach or anticipatory breach by him
of any of the provisions of this Section 6 would cause the Company irreparable
injury not compensable by monetary damages alone and that, accordingly, in any
such event, the Company shall be entitled to injunctions, both preliminary and
permanent, enjoining or restraining such breach or anticipatory breach without
the necessity of showing irreparable injury (and the Executive hereby consents
to the issuance thereof without bond by a court of competent jurisdiction).
7. CONFIDENTIAL INFORMATION.
The Executive acknowledges that during the course of his employment with the
Company he will have access to trade secrets, confidential and proprietary
information and know-how of the Company ("Confidential Information"). Except in
the ordinary course of properly performing his duties for the Company, the
Executive shall not at any time, without the Company's prior written consent
while employed or after termination of his employment, disclose, communicate or
divulge, or use for the benefit of himself or of any third party, any of the
Confidential Information of the Company. In the event the Executive learns
during his employment with the Company any trade secrets, confidential or
proprietary information or know-how of any customer, supplier or contractor of
the Company, the Executive shall maintain the confidence of such information.
8. RETURN OF MATERIALS.
Upon termination of the Executive's employment for any reason, the Executive
shall promptly deliver to the Company or, with the Company's consent, destroy
all documents and other materials in the Executive's possession or custody
(whether prepared by the Executive or
-15-
others) that the Executive obtained from the Company or a customer, supplier or
contractor of the Company during the Employment Period and which relate to the
past, present or anticipated business and affairs of the Company, including
without limitation, any Confidential Information.
9. 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.
10. LEGAL EXPENSES.
The Company shall pay the Executive's reasonable fees for legal and other
related expenses associated with any disputes arising hereunder or under any
other agreements, arrangements or understandings regarding Executive's
employment with the Company (including, without limitation, all agreements,
arrangements and understandings regarding bonuses, stock options, employee
benefits or other compensation issues) if either a court of competent
jurisdiction or an arbitrator shall render a final judgement or an arbitrator's
final decision 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 or arbitration 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.
-16-
11. 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 his primary residence, or
at such other place as the Executive may from time to time designate in writing,
or by personal delivery to the Executive, or by facsimile to the Executive with
oral confirmation of his receipt and with a copy immediately sent to the
Executive by first class U.S. Mail, 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 to the Chief Executive Officer of the Company, or by facsimile
to the Chief Executive Officer with oral confirmation of his receipt and with a
copy immediately sent to the Chief Executive Officer by first class U.S. Mail,
and to counsel for the Company as may be requested in writing by the Company. A
notice will be deemed given upon personal delivery, the mailing thereof or
delivery to an overnight courier for delivery the next business day, or the oral
confirmation of receipt by facsimile, except for a notice of change of address,
which will not be effective until receipt, and except as otherwise provided in
Section 5(a) hereof.
12. 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. Any
waiver of any provision of this Agreement must be in writing and signed by the
party granting the waiver.
13. 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.
14. 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.
15. AGREEMENT COMPLETE; AMENDMENTS.
Effective as of the Commencement Date, this Agreement, together with the
Exhibits hereto, the agreements referred to herein, and the instruments and
agreements pursuant to which any restricted stock or options held (now or in the
future) by the Executive entitling the Executive to retain or purchase
securities of the Company, constitutes 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
-17-
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.
16. 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 sale, 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 16, the
Company shall not be required to take all actions necessary to insure that a
buyer, survivor, transferee or transferees of the Company's assets
("Transferee") are bound by the provisions of this Agreement and such Transferee
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, in each case as if the
Executive had been terminated without Cause in anticipation of a Change in
Control.
17. GOVERNING LAW.
This Agreement will be governed and construed in accordance with the laws of
Texas applicable to agreements made and to be performed entirely within such
state, without giving effect to any choice or conflicts of laws principles which
would cause the application of the domestic substantive laws of any other
jurisdiction.
18. SURVIVAL.
The covenants, agreements, representations, warranties and provisions
contained in this Agreement that are intended to survive the termination of the
Executive's employment hereunder and the termination of the Employment Period
shall so survive such termination.
19. 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.
-18-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
KEY ENERGY SERVICES, INC.
By: /s/ XXXXXXX X. XXXX
--------------------------------------
Xxxxxxx X. Xxxx
President and Chief Executive Officer
/s/ XXXXX X. XXXXXXXXXX
--------------------------------------
XXXXX X. XXXXXXXXXX
-19-
EXHIBIT A
COMPANY PAID COVERAGES
1. Life Insurance. $2,000,000 payable to beneficiary designated by the
Executive.
2. 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 the
Base Salary.
3. Medical and Dental Plan. Comprehensive medical and dental plans available to
the Company's senior management, pursuant to which all medical and dental
expenses incurred by the Executive, his spouse and his children will be
reimbursed by the Company, through insurance or, in the absence of insurance,
directly by the Company, so that the Executive has no out-of-pocket cost with
respect to such expenses.
4. Director and Officer Liability Insurance.
5. Voluntary annual physicals at the Executive's option, with a report by the
examining physician to the Board regarding the Executive's ability to perform
job related functions.
-20-
EXHIBIT B
DEFINITION OF "CHANGE IN CONTROL"
The occurrence of any of the following shall constitute a "Change in
Control" of the Company:
(a) If any person (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as from time to time in effect (the "Exchange Act"),
or any successor provision), other than the Company, becomes the beneficial
owner directly or indirectly of more than twenty-five percent (25%) of the
outstanding Common Stock of the Company, determined in accordance with
Rule 13d-3 under the Exchange Act (or any successor provision), or otherwise
becomes entitled to vote more than twenty-five percent (25%) of the voting
power entitled to be cast at elections for directors ("Voting Power") of the
Company;
(b) If the Company is subject to the reporting requirements of Section
13 or 15(d) (or any successor provision) of the Exchange Act, and any person
(as defined in Section 3(a)(9) of the Exchange Act, or any successor
provision), other than the Company, purchases 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, if after
consummation of the offer, the person in question is the beneficial owner,
directly or indirectly, of more than twenty-five percent (25%) of the
outstanding Common Stock of the Company, determined in accordance with
Rule 13d-3 under the Exchange Act (or any successor provision);
(c) If the stockholders or the Board of Directors of the Company (the
"Board") approve any consolidation or merger of the Company (i) in which the
Company is not the continuing or surviving corporation unless such merger is
with a subsidiary of the Company (a "Subsidiary") at least eighty percent
(80%) of the Voting Power of which is held by the Company or (ii) pursuant
to which the holders of the Company's shares of Common Stock 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;
(d) The stockholders or the Board shall have approved 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; or
(e) Upon the election of one or more new directors of the Company, a
majority of the directors holding office, including the newly elected
directors, were not nominated as candidates by a majority of the directors
in office immediately before such election.
As used in this definition of "Change in Control", "Common Stock" means the
Common Stock, or if changed, the capital stock of the Company as it shall be
constituted from time to time
-21-
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.
Notwithstanding the occurrence of any of the events described in the
immediately preceding clauses (a) and (b) which would otherwise result in a
Change in Control pursuant to said clause (a) or (b), the Board may determine in
its discretion, if it deems it to be in the best interest of the Company, that
an event or events otherwise constituting a Change in Control pursuant to said
clause (a) or (b) but which would not constitute such a Change in Control if the
phrase "fifty percent (50%)" were to be substituted for the phrase "twenty-five
percent (25%)" each place it appears therein shall not be considered such a
Change in Control; provided, however, that such determination shall not affect
any accelerated vesting of any stock options or restricted stock purchase rights
or any extensions of the term of exercisability of such options or rights which
would otherwise have occurred by virtue of such events; and provided, further,
that such determination shall not be effective hereunder unless the Company
shall have at least one other executive officer who has a provision similar to
this paragraph in such executive officer's employment agreement with the Company
and the Board shall make such determination with respect to all executive
officers of the Company who have a provision similar to this paragraph in such
executive officers' employment agreements with the Company. Such determination
shall be effective only if it is made by the Board prior to the occurrence of an
event that otherwise would be or probably would lead to such a Change in
Control; or within thirty (30) days after such event if made by the Board a
majority of which is composed of directors who were members of the Board
immediately prior to the event that otherwise would be or probably would lead to
such a Change in Control.
-22-
