CHANGE OF CONTROL
AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (the
“Agreement”), is made and entered into effective as of
August 4, 2009 (the “Effective Date”), by and
between Exterran Holdings, Inc., a Delaware corporation (the
“Company”), and Norman A. Mckay
(“Executive”).
WHEREAS , the Company and Executive desire to enter into an
agreement regarding their respective rights and obligations in
connection with a Change of Control during the Term of this
Agreement;
THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company and
Executive agree as follows:
1. Term. This Agreement shall begin on the Effective
Date and shall continue until August 20, 2011; provided,
however , that commencing on August 20, 2011 and on each
August 20 thereafter, the term of this Agreement shall
automatically be extended for one additional year (such initial
period, plus any extensions, plus, in the event of
Executive’s Qualifying Termination of Employment for Good
Reason, any additional time period necessitated by the
Company’s right to cure as set forth in the definition of
“Good Reason,” the “Term”), unless at least
90 days prior to such August 20 date the Board shall give
written notice to Executive that the Term of this Agreement shall
cease to be so extended. However, if a Change of Control shall
occur during the Term, the Term shall automatically continue in
effect for a period of 18 months plus, in the event of
Executive’s Qualifying Termination of Employment for Good
Reason, any additional time period necessitated by the
Company’s right to cure as set forth in the definition of
“Good Reason,” commencing on the date of such Change of
Control. This Agreement shall automatically terminate on
Executive’s termination of employment, except as provided in
the definition of “Protected Period.” Termination of
this Agreement shall not alter or impair any rights of Executive
arising under this Agreement on or prior to such
termination.
2. Qualifying Termination of Employment. If Executive
incurs a Qualifying Termination of Employment, Executive shall be
entitled to the benefits provided in Section 3 hereof. If
Executive’s employment terminates for any reason other than
for a Qualifying Termination of Employment, then Executive shall
not be entitled to any benefits under this Agreement.
3. Benefits Upon a Qualifying Termination of
Employment.
(a) Lump
Sum . Following a Qualifying Termination of Employment, the
Company shall pay to Executive, not later than the 60th day
following the Date of Termination, an amount, in a lump sum
payment, equal to the sum of:
(i) The total of
(A) Executive’s earned but unpaid Base Salary through
the Date of Termination plus (B) Executive’s Target
Bonus for the current year (prorated to Date of Termination) plus
(C) any earned but unpaid Actual Bonus for the prior year (if
the prior year’s Actual Bonus has not yet been
calculated as
of the Date of Termination such amount shall be payable when
calculated, but in no event later than March 15th of the year
following the Termination Year); plus
(ii) Any portion
of Executive’s vacation pay accrued, but not used, for the
Termination Year as of the Date of Termination; plus
(iii) The product
of two (2) multiplied by the sum of Executive’s Base
Salary and Target Bonus amount for the Termination Year (not
prorated); plus
(iv) An amount
equal to the total of the employer matching contributions that
would have been credited to Executive’s account under the
401(k) Plan and any other deferred compensation plan of the Company
(or any of its affiliated companies) had Executive made the
required amount of elective deferrals or contributions to receive
such maximum employer matching contributions under the 401(k) Plan
and any other deferred compensation plan (and regardless of whether
Executive actually made any such elective deferrals or
contributions) during the 12-month period immediately preceding the
month of Executive’s Date of Termination, multiplied by two
(2); plus
(v) Amounts
previously deferred by Executive, if any, or earned but not paid,
if any, under any Company incentive and nonqualified deferred
compensation plans or programs as of the Date of
Termination.
(b) Continuing
Medical Coverage. For a period of two (2) years from
Executive’s Date of Termination, or such longer period as may
be provided by the terms of the appropriate medical and/or welfare
benefit plan, program, practice or policy, the Company shall
provide benefits to Executive and/or Executive’s eligible
dependents equal to those that would have been provided to them in
accordance with the plans, programs, practices and policies if
Executive’s employment had not been terminated; provided,
however , that with respect to any of such plans, programs,
practices or policies requiring an employee contribution, Executive
shall continue to pay the monthly employee contribution for same,
and provided further, that if Executive becomes employed by another
employer and is eligible to receive medical or other welfare
benefits under another employer-provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility.
(c) Awards.
All stock options, restricted stock, restricted stock units, or
other awards based in common stock of the Company, and all common
units, unit appreciation rights, unit options and other awards
based in common units representing limited partner interests of the
Partnership, and all cash-based incentive awards held by Executive
and not previously vested shall be 100% vested as of
Executive’s Date of Termination (except with respect to
awards denominated in or relating to common units of the
Partnership that, by their terms, continue to vest following a
termination of employment without cause or for good reason);
provided, however , that with respect to an award that is
subject to Code Section 409A, such acceleration of vesting
under this Section 3(c) shall
not cause an
impermissible acceleration of payment or change in form of payment
of such award under Code Section 409A. Notwithstanding the
terms of any Company (or affiliate) plan or agreement between the
Company (or affiliate) and Executive to the contrary, the
accelerated vesting of all stock options, restricted stock,
restricted stock units, or other awards required pursuant to the
terms of this Section 3(c) shall govern.
(d)
Interest. If any payment due under the terms of this
Agreement is not timely made by the Company, its successors or
assigns, interest shall accrue on such payment at the highest
maximum legal rate permissible under applicable law from the date
such payment first became due through the date it is paid (with
such interest paid in a single lump sum as of the date the Company
makes the late payment).
(e)
Release. Notwithstanding anything in this Agreement to the
contrary, no payment shall be made or benefits provided pursuant to
this Agreement unless Executive signs and returns to the Company
within 50 days following the date of a Qualifying Termination
of Employment, and does not revoke within seven days thereafter, a
complete release and waiver, in exchange for the severance payments
described in Section 3(a) above, among other items, of all claims
for liability and damages in any way related to Executive’s
employment against the Company, its affiliates, their directors,
officers, employees and agents, and their employee benefit plans
and fiduciaries and agents of such plans in a form provided by the
Company.
(f) Severance
Offset . Any cash severance payments provided under Section
3(a) shall be offset or reduced by the amount of any cash severance
amounts payable to Executive under any other individual agreement
the Company or an affiliate may have entered into with Executive or
any severance plan or program maintained by the Company or any
affiliate for employees in general, but only to the extent such
severance amounts are payable in the same form and in the same
calendar year in which such cash severance payments under this
Agreement are to be made.
(g) Code
Section 409A Matters.
(i) This Agreement
is intended to comply with, and shall be interpreted consistent
with the applicable requirements of, Code Section 409A and any
ambiguous provisions will be construed in a manner that is
compliant with or exempt from the application of Code
Section 409A. Executive shall have no right to specify the
calendar year during which any payment hereunder shall be
made.
(ii) All
reimbursements and in-kind benefits provided pursuant to this
Agreement shall be made in accordance with Treasury Regulations
Section 1.409A-3(i)(1)(iv) such that any reimbursements or in-kind
benefits will be deemed payable at a specified time or on a fixed
schedule relative to a permissible payment event. Specifically,
(A) the amounts reimbursed and in-kind benefits under this
Agreement, other than with respect to medical benefits provided
under Section 3(b), during Executive’s taxable year may
not affect the amounts reimbursed or in-kind benefits provided in
any other taxable year, (B) the
reimbursement
of an eligible expense shall be made on or before the last day of
Executive’s taxable year following the taxable year in which
the expense was incurred, and (C) the right to reimbursement
or an in-kind benefit is not subject to liquidation or exchange for
another benefit.
(iii) If Executive
is a “specified employee” within the meaning of Code
Section 409A as of his Date of Termination, distributions or
benefits that are subject to Code Section 409A shall be made
under this Agreement on the later of (A) the date that such
distribution or benefit is otherwise to be provided under this
Agreement and (B) the earlier of (x) the first business
day that occurs following the expiration of six months after
Executive’s Date of Termination or (y) the date of
Executive’s death. The severance payments under Section 3(a)
are deferred compensation subject to the foregoing provision. In
addition, in the event of a payment delayed under this
Section 3(g)(iii), the Company agrees to pay to Executive, as
of the date it makes the delayed payment, simple interest on such
delayed amount at the applicable Federal rate provided for in Code
Section 7872(f)(2)(A), based on the number of days the payment was
delayed. If Executive disagrees with the Company’s
determination that Code Section 409A requires such six-month
delay with respect to a payment or benefit, such payment or benefit
can be made prior to such delayed payment date if Executive agrees
in writing (in the form approved by the Company) that should the
IRS subsequently assert that some or all of the payments or
benefits made pursuant to this Agreement do not comply with the
requirements of Code Section 409A, then (i) Executive
agrees that he is solely responsible for all taxes, excise taxes,
penalties and interest resulting from such determination, and that
he will not seek contribution, reimbursement or any other recovery
from the Company or any of its affiliates, officers, employees or
directors for any taxes, excise taxes, interest or penalties paid
or due or any costs he incurs in challenging such position of the
IRS, and (ii) Executive will reimburse, and hold the Company,
its affiliates, officers, employees or directors harmless for, any
costs, including attorneys fees and costs of court, penalties or
fees, that it may incur in connection with a later determination
that the payments made pursuant to this Agreement are covered by
Code Section 409A and were not properly reported as
such.
4. Restrictions and Obligations of
Executive.
(a)
Consideration for Restrictions and Covenants . The Company
and Executive agree that the principal consideration for the
agreement to make the payments provided in this Agreement by the
Company to Executive is Executive’s compliance with the
undertakings set forth in this Section 4. Notwithstanding any
other provision of this Agreement to the contrary, Executive agrees
to comply with the provisions of this Section 4 only if
Executive actually receives any such payments from the Company
pursuant to this Agreement.
(b)
Confidentiality . Executive acknowledges that the Company
will provide Executive with Confidential Information and has
previously provided Executive with Confidential Information. In
return for consideration provided under this Agreement,
Executive
agrees that Executive will not, while employed by the Company or
any affiliate and thereafter for a period of two years, disclose or
make available to any other person or entity, or use for
Executive’s own personal gain, any Confidential Information,
except for such disclosures as required in the performance of
Executive’s duties with the Company or as may otherwise be
required by law or legal process (in which case Executive shall
notify the Company of such legal or judicial proceeding as soon as
practicable following his receipt of notice of such a proceeding,
and permit the Company to seek to protect its interests and
information).
(c)
Non-Solicitation or Hire . During the term of
Executive’s employment with the Company or any affiliate
thereof and for a two-year period following the termination of
Executive’s employment for any reason, Executive shall not,
directly or indirectly (i) employ or seek to employ any person who
is at the date of termination, or was at any time within the
six-month period preceding the date of termination, an officer,
general manager or director or equivalent or more senior level
employee of the Company or any of its subsidiaries or otherwise
solicit, encourage, cause or induce any such employee of the
Company or any of its subsidiaries to terminate such
employee’s employment with the Company or such subsidiary for
the employment of another company (including for this purpose the
contracting with any person who was an independent contractor
(excluding consultant) of the Company during such period) or
(ii) take any action that would interfere with the
relationship of the Company or its subsidiaries with their
suppliers or customers without, in either case, the prior written
consent of the Company’s Board of Directors, or engage in any
other action or business that would have a material adverse effect
on the Company.
(d)
Non-Competition . During the term of Executive’s
employment with the Company, or any affiliate thereof and for a
two-year period following the termination of Executive’s
employment for any reason, Executive shall not, directly or
indirectly:
(i) Engage in any
managerial, administrative, advisory, consulting, operational or
sales activities in a Restricted Business anywhere in the
Restricted Area, including, without limitation, as a director or
partner of such Restricted Business, or
(ii) Organize,
establish, operate, own, manage, control or have a direct or
indirect investment or ownership interest in a Restricted Business
or in any corporation, partnership (limited or general), limited
liability company, enterprise or other business entity that engages
in a Restricted Business anywhere in the Restricted
Area.
Nothing
contained in this Section 4 shall prohibit or otherwise
restrict Executive from acquiring or owning, directly or
indirectly, for passive investment purposes not intended to
circumvent this Agreement, securities of any entity engaged,
directly or indirectly, in a Restricted Business if either
(i) such entity is a public entity and Executive (A) is
not a controlling Person of, or a member of a group that controls,
such entity and (B) owns, directly or indirectly, no more than
3% of any class of equity securities of such entity or
(ii) such entity is not a public entity and Executive
(A) is not a controlling Person of, or a
member of a
group that controls, such entity and (B) does not own,
directly or indirectly, more than 1% of any class of equity
securities of such entity.
(e) Injunctive
Relief . Executive acknowledges that monetary damages for any
breach of Section 4(b), (c), and (d) above will not be an
adequate remedy and that irreparable injury will result to the
Company, its business and property, in the event of such a breach.
For that reason, Executive agrees that in the event of a breach, in
addition to recovering legal damages, the Company is entitled to
proceed in equity for specific performance or to enjoin Executive
from violating such provisions.
5. Miscellaneous Provisions.
(a) Definitions
Incorporated by Reference . Refere
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