Execution Copy
CONSULTING AGREEMENT
This AGREEMENT (the "Agreement"), dated as of November 12, 1998, by and among
Key Energy Group, Inc., a Maryland corporation ("Parent"), and C. Xxx Xxxxxxx
("Consultant").
WHEREAS, Consultant previously held the position of President of Yale E. Key,
Inc., a Texas corporation (the "Company");
WHEREAS, effective as of the date hereof, the Parent and Consultant have
terminated their employment relationship and, in connection therewith, the
Parent and Consultant have entered into a Confidential Separation and Release
Agreement (the "Release Agreement"); and
WHEREAS, Parent entering into this Agreement is a material inducement to
Consultant entering into the Release Agreement; and
WHEREAS, Parent desires to secure the benefit of Consultant's knowledge,
experience and services by retaining Consultant, and Consultant desires to
provide services to Parent and its subsidiaries and affiliates, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
representations, agreements, and promises set forth herein, and intending to be
legally bound, the parties agree as follows:
1. Consulting Services. During the Term (as defined below), Consultant shall
make himself available to perform consulting services with respect to the
businesses conducted by Parent and its subsidiaries and affiliates, as such
consulting services may be requested from time to time by the Parent's Chief
Executive Officer or Board of Directors. Such request for Consultant's services
shall provide reasonable notice to Consultant. Consultant shall accommodate
reasonable requests for Consultant's consulting services, and shall devote
reasonable time and his reasonable best efforts, skill and attention to the
performance of such consulting services, including travel reasonably required in
the performance of such consulting services. Such consulting services are
estimated to require approximately forty (40) hours of Consultant's time per
month.
2. Term. The term of Consultant's engagement under this Agreement shall commence
on the date hereof and, unless earlier terminated pursuant to Section 4 hereof,
shall continue in effect for a period of three (3) years thereafter (the
"Term"). There shall be no extension of this Agreement other than by written
instrument duly executed and delivered by the parties hereto.
3. Consulting Fees and Expenses. During the Term, Parent shall pay, or cause to
be paid to, Consultant an annual fee of $175,000, payable in equal bi-weekly
installments (subject to proration for any partial period) on the last day of
each bi-weekly period during the Term to an account designated in writing by
Consultant (such payments, together with the payments required under Section 5.4
hereof being referred to collectively herein as the "Fees"). The payor may make
any tax withholding it deems to be necessary under applicable tax laws. In
addition, Consultant shall be reimbursed for reasonable, documented,
out-of-pocket expenses incurred in connection with consulting services rendered
pursuant to this Agreement; provided that such expenses are submitted for
reimbursement within thirty (30) days of the date such expenses are incurred.
4. Termination. Notwithstanding any provision of this Agreement to the contrary,
prior to the expiration of the Term:
(a) This Agreement may be terminated by Parent for the following reasons: (i)
in the reasonable judgment of the Chief Executive Officer of Parent, the
willful engaging by Consultant in conduct on or after the date hereof which
is materially injurious to Parent or its subsidiaries or affiliates; (ii)
Consultant's conviction of, guilty plea concerning, no contest plea
concerning or confession of fraud, theft, embezzlement or similar
malfeasance or any crime of moral turpitude on or after the date hereof;
(iii) in the reasonable judgment of the Chief Executive Officer of Parent,
the material breach by Consultant of this Agreement; or (iv) in the
reasonable judgment of the Chief Executive Officer of Parent, an act of
gross neglect or gross misconduct by Consultant on or after the date
hereof; provided, however, that in the case of any act or failure to act
described in clauses (i), (iii) and (iv), such act or failure to act shall
not constitute grounds for termination if, within ten (10) days after
Notice of Termination (as defined below) is given to Consultant, Consultant
has, to the reasonable satisfaction of the Chief Executive Officer of
Parent, corrected such act or failure to act or the Chief Executive Officer
of Parent is otherwise satisfied that termination is not in the best
interests of Parent. In the event that Consultant disputes Parent's action
in terminating this Agreement pursuant to this Section 4(a) and commences
arbitration pursuant to Section 7 of this Agreement, Parent shall continue
to make, on a timely basis, all payments due to Consultant hereunder, until
a final arbitration decision and/or award is made; provided, however, that
if Parent is the prevailing party in such an arbitration, Consultant shall
immediately repay to Parent any and all payments made to Consultant
pursuant to this sentence, together with interest computed at an annual
rate equal to the prime rate plus one percent (1%).
(b) This Agreement may be terminated by Consultant in the event of a material
breach of this Agreement by Parent, which breach shall not be cured by
Parent within ten (10) days after Notice of Termination is given by
Consultant.
(c) This Agreement (i) may be terminated by the mutual written agreement of the
parties hereto; (ii) shall be terminated without any additional action in
the event of Consultant's death or adjudicated incompetency; and (iii) may
be terminated by Parent in the event Consultant shall become disabled by
illness, injury or other incapacity as a result of which Consultant is
unable to perform services under this Agreement for a period or periods
aggregating ninety (90) days in any twelve (12) consecutive months.
(d) Any termination of this Agreement by Parent or by Consultant shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 10.4 of this Agreement. For purposes of this
Agreement, a "Notice of Termination" shall mean a written notice which
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of this Agreement.
(e) Upon termination of this Agreement, other than by Consultant pursuant to
paragraph (b) of this Section 4, Consultant or Consultant's heirs, as the
case may be, shall be entitled to receive (i) any unpaid Fees accrued
through the date of termination and (ii) any unpaid expenses incurred prior
to the date of termination submitted for reimbursement in accordance with
Section 3 hereof, and Parent shall have no further obligation to Consultant
or Consultant's heirs. Upon termination of this Agreement by Consultant
pursuant to paragraph (b) of this Section 4, Consultant shall be entitled
to receive (x) any unpaid Fees accrued through the date of termination, (y)
any unpaid expenses incurred prior to the date of termination and submitted
for reimbursement in accordance with Section 3 hereof and (z) a lump sum
payment equal to the unaccrued and unpaid Fees Consultant would have
otherwise received under this Agreement, and Parent shall have no further
obligation to Consultant other than the payments owed Consultant under
Section 5.4 hereof (and Consultant's obligations under Section 5 and the
other applicable provisions shall continue beyond such termination).
5. Restrictive Covenants.
5.1 Confidential Information. During the Term and at all times after the
termination of Consultant's engagement upon expiration of the Term or otherwise,
Consultant shall not, directly or indirectly, whether individually, as a
director, stockholder, owner, partner, employee, principal or agent of any
business, or in any other capacity, make known, disclose, furnish, make
available or utilize any confidential information relating to the business and
affairs of Parent and its subsidiaries and affiliates, other than in the proper
performance of the duties contemplated herein, or as required by a court of
competent jurisdiction or other administrative or legislative body; provided
that, prior to disclosing any of the confidential information to a court or
other administrative or legislative body, Consultant shall promptly notify
Parent so that Parent may seek a protective order or other appropriate remedy.
Consultant agrees to return all confidential information, including all
photocopies, extracts and summaries thereof, and any such information stored
electronically on tapes, computer disks or in any other manner to Parent at any
time upon request by Parent and upon the termination of his engagement for any
reason.
5.2 No Solicitation. Consultant agrees that during the Non-Compete Term (as
defined below), he will not hire or solicit to hire, directly or indirectly, any
employee of Parent or its subsidiaries or affiliates, or otherwise solicit,
directly or indirectly, any employee of Parent or its subsidiaries or affiliates
to leave the employ of Parent or its subsidiaries or affiliates.
5.3 Covenant Not to Compete. During the three-year period beginning on the date
hereof, notwithstanding the earlier termination of this Agreement (the
"Non-Compete Term"), Consultant shall not, in the Continental United States or
in Argentina, directly or indirectly engage in the following businesses: (i)
workover rig services, including completion of new xxxxx, maintenance and
recompletion of existing xxxxx (including horizontal recompletions) and plugging
and abandonment of xxxxx at the end of their useful lives; (ii) liquid services,
including vacuum truck services, frac tank rental and salt water injection;
and/or (iii) production services, including well test analysis, pipe testing,
slickline wireline services and fishing and rental tool services. Additionally,
Consultant shall not own an interest in any company that is not publicly traded
and engages in the foregoing businesses. Without limiting the generality of the
foregoing, Consultant shall not interfere with the business or accounts of
Parent and its subsidiaries and affiliates, including the making of any
statements or comments of a defamatory or disparaging nature to third parties
regarding Parent or its subsidiaries or affiliates or their respective officers,
directors, personnel, products or services.
5.4 Consideration. In exchange for Consultant's covenant not to compete
contained in Section 5.3 hereof, and in addition to the consulting fees to be
paid to Consultant pursuant to Section 3 hereof, Parent shall pay, or cause to
be paid to, Consultant an additional aggregate amount of $150,000, payable in
seventy-eight (78) equal bi-weekly installments (subject to proration for any
partial period) on the last day of each bi-weekly period of the Term to an
account designated in writing by Consultant. The payor may make any tax
withholding it deems to be necessary under applicable tax laws. Consultant
acknowledges that the consideration described in this Section 5.4 is adequate,
fair and reasonable.
5.5 Reasonableness of Restrictive Covenants; Irreparable Injury. Consultant
acknowledges that this Agreement is being entered into in connection with the
consummation of the transactions contemplated by the Merger Agreement, that the
services to be rendered by him to Parent and its subsidiaries and affiliates are
of a special and unique character, which gives this Agreement a peculiar value
to Parent, the loss of which may not be reasonably or adequately compensated for
by damages in an action at law, and that a material breach or threatened breach
by him of any of the provisions contained in this Section 5 will cause Parent
irreparable injury. Consultant therefore agrees that Parent shall be entitled,
in addition to any other right or remedy, to a temporary, preliminary and
permanent injunction, without the necessity of proving the inadequacy of
monetary damages or the posting of any bond or security, enjoining or
restraining Consultant from any such violation or threatened violations.
6. Return of Property. Consultant agrees that following the termination of his
engagement for any reason, he shall return all property of Parent and its
subsidiaries and affiliates that is then in or thereafter comes into his
possession, including, but not limited to, computers, documents, contracts,
agreements, plans, photographs, books, notes, electronically stored data and all
copies of the foregoing as well as any other materials or equipment supplied by
Parent and its subsidiaries and affiliates to Consultant.
7. Arbitration. Any dispute between the parties arising out of this Agreement,
including but not limited to any dispute regarding any aspect of this Agreement,
its formation, validity, interpretation, effect, performance or breach
("arbitrable dispute") shall be submitted to arbitration in the city of Houston,
Texas, before an experienced arbitrator who is either licensed to practice law
in Texas, or is a retired judge. The parties agree to make a good faith effort
to select a mutually agreeable arbitrator. However, if the parties are unable to
reach agreement on an arbitrator, one will be selected pursuant to the
commercial rules of the American Arbitration Association or any successor rules
thereto. The arbitration shall be conducted in accordance with the commercial
rules of the American Arbitration Association or any successor rules. The
arbitrator in any arbitrable dispute shall not have authority to modify or
change this Agreement in any respect except to the extent set forth in Section
10.5 hereof. The prevailing party in any such arbitration shall be awarded its
costs, expenses, and reasonable attorneys' fees incurred in connection with the
arbitration, in an aggregate amount not to exceed $10,000. Consultant and Parent
shall each be responsible for payment of one-half of the amount of any
arbitrator's fee(s) payable prior to the existence of a prevailing party, such
amounts to be repaid to the prevailing party pursuant to the previous sentence.
The arbitrator's decision and/or award will be final and binding and fully
enforceable and subject to an entry of judgment by any court of competent
jurisdiction.
8. Consultant's Independence and Discretion.
(a) Nothing herein contained shall be construed to constitute the parties
hereto as partners or as joint venturers, or either as agent of the other,
or as employer and employee. By virtue of the relationship described herein
Consultant's relationship to Parent during the term of this Agreement shall
only be that of an independent contractor and Consultant shall perform all
services pursuant to this Agreement as an independent contractor.
Consultant shall not provide any services under the business name of Parent
or its subsidiaries or affiliates and shall not present himself as an
employee of Parent or its subsidiaries or affiliates.
(b) Subject only to such specific limitations as are contained in this
Agreement, the manner, means, details or methods by which Consultant
performs his obligations under this Agreement shall be solely within the
discretion of Consultant. Parent shall not have the authority to, nor shall
it, supervise, direct or control the manner, means, details or methods
utilized by Consultant to perform his obligations under this Agreement and
nothing in this Agreement shall be construed to grant Parent any such
authority.
9. Miscellaneous.
9.1 Successors and Assigns; Binding Agreement. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns, provided, however, that
the services to be provided by Consultant hereunder are personal to Consultant
and may not be delegated or assigned by him.
9.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to conflict of law
rules thereof.
9.3 Waivers. The waiver by either party hereto of any right hereunder of any
failure to perform or breach by the other party hereto shall not be deemed a
waiver or any other right hereunder or of any other failure or breach by the
other party hereto, whether of the same or a similar nature or otherwise. No
waiver shall be deemed to have occurred unless set forth in a writing executed
by or on behalf of the waiving party. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
9.4 Notices. All notices and communications that are required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
when delivered personally or sent by overnight carrier service (such as Federal
Express) to the parties at the following addresses:
If to Parent, to:
Key Energy Group, Inc.
Xxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxxx Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
If to Consultant, to:
C. Xxx Xxxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
or to such other address as may be specified in a written notice delivered
personally or sent by overnight courier given by one party to the other party
hereunder.
9.5 Severability. If for any reason any term or provision of this Agreement is
held to be invalid or unenforceable, all other valid terms and provisions hereof
shall remain in full force and effect, and all of the terms and provisions of
this Agreement shall be deemed to be severable in nature. If for any reason any
term or provision containing a restriction set forth herein is held to cover an
area or to be for a length of time which is unreasonable, or in any other way is
construed to be too broad or to any extent invalid, such term or provision shall
not be determined to be null, void and of no effect, but to the extent the same
is or would be valid or enforceable under applicable law, any court of competent
jurisdiction shall construe and interpret or reform this Agreement to provide
for a restriction having the maximum enforceable area, time period and other
provisions (not greater than those contained herein) as shall be valid and
enforceable under applicable law.
9.6 Amendment. This Agreement may not be amended or modified except by an
agreement in writing, signed by the parties hereto.
9.7 Entire Agreement. This Agreement, together with the Confidential Separation
and Release Agreement dated as of the date hereof, constitute the entire
agreement between the parties hereto, and supersedes all prior oral and/or
written understandings and/or agreements between the parties hereto.
9.8 Descriptive Headings. The parties hereto agree that the headings contained
herein are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
9.9 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original for all purposes but which, together, shall
constitute one and the same instrument.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
and year first above written.
KEY ENERGY GROUP, INC.
By:
Name:
Title:
C. XXX XXXXXXX
