TREY WHICHARD
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 26th day of March, 2009, by and between TREY WHICHARD (the
“ Executive ”) and KEY ENERGY SHARED
SERVICES, LLC, a Delaware limited liability company (the “
Company ”).
1. Employment; Term.
(a) Commencing on March 26,
2009 (the “ Commencement Date ”), the
Company hereby employs the Executive, and the Executive hereby
accepts employment by the Company, as the Company’s Vice
President and Treasurer, and the Senior Vice President and Chief
Financial Officer of Key Energy Services, Inc. (the
“Parent”). The Executive shall have the
responsibilities, duties and authority commensurate with his
positions as the Senior Vice President and Chief Financial Officer,
including without limitation the general supervision and control
over, and responsibility for, the overall financial and related
activities of the Parent and its subsidiaries, and such other
responsibilities, duties, functions and authority as the Chief
Executive Officer or, in certain circumstances, the Board shall
from time to time designate that do not effect a material decrease
in the responsibilities, importance, scope or dignity of the
Executive’s position compared with those of such position as
of the Commencement Date, subject, however, to the supervision of
the Chief Executive Officer or, in certain circumstances, the
Board. The Executive will report to the Chief Executive Officer or,
in certain circumstances, the Board. Executive will, if appointed
or elected, serve as an officer or director of the Company, the
Parent, subsidiaries or affiliates (collectively, the “
Key Companies ”) and perform all duties
incident to such offices.
(b) Executive shall hold such
positions with the Company and Parent hereunder until the close of
business on March 26, 2011, unless sooner terminated in
accordance with Section 5, and at the close of business on
each anniversary of such date, commencing with March 26, 2011,
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 next preceding the relevant Anniversary Date. (The
entire period of employment of Executive, until termination in
accordance herewith, is referred to hereby as the “
Employment Period ”).
(c) The Executive will devote
his full time and his best efforts to the business and affairs of
the Company, its Parent, and its subsidiaries; provided, however,
that nothing contained in this Section 1 shall be deemed to
prevent or limit the Executive’s right to: (i) make
investments in the securities of any publicly-owned corporation; or
(ii) make any other investments with respect to which he is
not obligated or required to, and to which he does not in fact,
devote managerial efforts that 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 7 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 Houston, Texas offices.
2. Salary; Bonuses; Expenses.
(a) During the Employment
Period, the Company will pay base compensation to the Executive at
the annual rate of Three Hundred Seventy-Five Thousand Dollars
($375,000) 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. The Company will review the Base Salary on
a yearly basis following the end of each fiscal year of the Company
to determine if an increase is advisable, and the Base Salary may
be increased at the discretion of the Chief Executive Officer and
the Compensation Committee (the “Compensation
Committee” ) of the Board, taking into
account, among other factors, the Executive’s performance and
the performance of the Company.
(b) The Executive shall be
eligible to participate in all of the Company’s cash
performance compensation plans (collectively, the
“Performance Cash Compensation Plans”
) for the Company’s executives providing for the
payment of cash bonuses or other cash incentives payable upon the
achievement of goals set forth in the Company’s strategic
plan as developed by the Compensation Committee after consultation
with the Chief Executive Officer and the Executive, payable in
accordance with the provisions thereof. The performance goals for
the Performance Cash Compensation Plans 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 Cash Compensation Plans 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. Equity-Based Incentives.
The Executive shall be eligible to
participate in awards of stock options, restricted stock, deferred
stock, stock appreciation rights, and other equity-based incentives
(collectively, “ Equity-Based Incentives
”), at the discretion of the Board or the Compensation
Committee. Any performance goals for the grant of such Equity-Based
Incentives will be based on objective criteria mutually negotiated
and agreed upon in good faith in advance by the Board or 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 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) business days in any fiscal year (prorated in any fiscal
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) and subject to the Company’s
policies on carryovers. The Executive shall also be entitled to all
paid holidays and personal days given by the Company to its senior
management.
(c) Nothing herein contained
shall preclude the Executive, to the extent he is otherwise
eligible, from participation in all group insurance programs or
other fringe benefit plans which the Company may from time to time
in its sole and absolute discretion make available generally to its
personnel, or for personnel similarly situated, but the Company
shall not be required to establish or maintain any such program or
plan except as may be otherwise expressly provided herein.
5. Termination, Change 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(b) 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(b) 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(b) 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. Notwithstanding a notice
of termination that does not, when made, specify Cause, the Company
may, during the 90 day notice period (the “ Cause
Review Period ”), convert the termination to a Cause
termination, subject to the procedural safeguards specified in the
next paragraph.
As used in this Agreement, the term
“ Cause ” shall mean (i) the failure
by the Executive to substantially perform the major functions of
his position in a satisfactory manner (other than (A) any such
failure resulting from his incapacity due to physical or mental
illness or physical injury or (B) any such actual or
anticipated failure after the issuance of a notice of termination
by the Executive for Good Reason (as defined below)), after 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 engaging by the Executive in
misconduct that is, or is reasonably likely to be, materially
injurious to the Company, monetarily or otherwise; or
(iii) the Executive’s conviction or plea of guilty or no
contest to a felony (or to a felony charge reduced to misdemeanor),
or, with respect to his employment, to any misdemeanor (other than
a traffic violation) or, with respect to his employment, knowing
violation of any federal or state securities or tax laws; or
(iv) willful violation of the Key Energy Services, Inc. Policy
Prohibiting Insider Trading and Unauthorized Disclosure of
Information and the Supplemental Insider Trading Policy, as amended
from time to time. 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 for an
aggregate of ninety (90) days (whether or not consecutive)
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 such ninety (90) day period (whether
or not consisting of consecutive days), such 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 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 an aggregate of ninety
(90) days (whether or not consecutive) 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(b)
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(b) hereof, only the 90-day notice period
therein provided shall be required); or (ii) at any time for
Good Reason, provided that the Executive can only give a notice of
resignation for Good Reason in connection with a “Change in
Control” of the Parent (as defined in Exhibit B)
beginning on the ninetieth (90th) day after the closing of the
transaction or the event constituting a Change in Control. 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, “Good Reason” shall mean the continued
existence from the date of the notice from the Executive referred
to below until after the expiration of the Cure Period of any one
or more of only the following circumstances or conditions:
(i) A material diminution in the Executive’s Base
Compensation, authority, duties or responsibilities,
(ii) A material diminution in the authority, duties or
responsibilities of a supervisor to whom the Executive reports
(including a requirement that the Executive report to another
individual rather than to the Board of Directors of the
Company),
(iii) A material diminution in the budget over which the
Executive retains authority,
(iv) A material change in the geographic location at which the
Executive must perform the services required by this Agreement;
or
(v) Any other action or inaction by the Company that
constitutes a material breach of this Agreement.
The existence of any circumstance or condition shall not
constitute Good Reason unless (i) the Executive provided
notice to the Company of the existence of the
circumstance or conditions within 90 days of the initial
existence of such circumstance or condition, and (ii) the
circumstance or condition continued to exist after the last day of
the Cure Period. For purposes of this Section 5(c), the term
“Cure Period” means the period of 30 consecutive days
beginning on the date notice was given by the Executive of the
existence of the circumstance or condition alleged to be Good
Reason.
(d) Severance
Compensation .
(i) Termination by
Executive for Good Reason or by the Company for Non Renewal 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, for
Disability, or upon Notice of Non-Renewal, 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 two (2) times his Base Salary at the rate in effect on the
termination date, (but no less than the annual Base Salary
specified in Section 2(a)) payable in twenty-four
(24) substantially equal monthly installments commencing at
the end of the calendar month in which the termination date occurs.
Each monthly installment payment required under this
Section 5(d)(i) shall be payable on or about the first day of
the month to which it relates, and the right to any series of
separate installment payments under this Section 5(d)(i) shall
at all times be a right to a series of separate payments under
Treasury Reg. 1.409A-2(b)(2)(iii).
(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 one (1) times his Base Salary at the rate in effect
on the termination date, payable in twelve (12) substantially
equal monthly installments commencing at the end of the calendar
month in which the termination date occurs, reduced by the amount
of any employer-provided disability insurance proceeds actually
paid to the Executive or for his benefit during such time
period.
(iii) If the Executive’s
employment is terminated within one (1) year following a
Change in Control of the Parent that is a “change in control
event” as defined in Treas. Reg. §1.409A-3(i)(5) and the
Executive is entitled to severance compensation pursuant to
Section 5(d)(i) or 5(d)(ii) hereof as a result of such
termination, the severance compensation otherwise payable to the
Executive (A) shall be increased by an amount (the
“Enhanced Severance Amount”) sufficient, when added to
the amount payable under Section 5(d)(i) or 5(d)(ii) hereof,
to cause the total amount payable as the result of such termination
to equal three (3) times the Base Salary then in effect plus
three (3) times the Executive’s annual target cash bonus
as provided in Section 2(b) above and (B) the Enhanced
Severance Amount shall be payable in one lump sum on the effective
date of such termination. In the event severance compensation
becomes payable in a lump sum pursuant to this
Section 5(d)(iii), and if the Executive’s employment is
or has been terminated for Disability, such lump sum shall be
reduced by a good faith estimate of the aggregate amount of any
disability insurance proceeds which will be actually paid to the
Executive or for his benefit (but only those proceeds from
disability insurance provided by the Company to the Executive
pursuant to Section 4(a) hereof) during the remaining period over
which such severance would otherwise have been paid.
(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.
(v) Termination by
Executive other than for Good Reason or by Company for Cause .
In the event of the Executive’s termination by resignation
under Section 5(c)(i) (i.e., other than for Good Reason) or by
the Company for Cause, the Executive shall not be entitled to any
severance under Section 5(d) or otherwise, any continued benefits
under Section 5(f) (other than as required by statute), or any
accrued compensation under Section 5(g)(iii) (for prior year
bonuses, to the extent specified in that clause). Under the
foregoing situations, the treatment of equity incentives shall be
as specified in Section 5(e)(ii), and the Executive shall
receive the accrued compensation described in
Section 5(g).
(vi) Release .
Executive agrees that except in the case of a termination resulting
from Executive’s death, all payments under Section 5
(d), (e), (f), and (g)(iii) and Section 6 are conditioned on
the Executive’s prior execution and non-revocation of a full
release of the Company and its officers, employees, affiliates and
subsidiaries for all claims relating to his employment,
compensation, and termination and such other matters as the Company
reasonably requests on termination, in a form provided by the
Company, which execution shall not occur earlier than the day after
termination of the Executive’s employment and not later than
60 days following delivery by the Company to the Executive of
the form for such release; provided, however, that if no form for
such release is delivered to the Executive within seven
(7) days of the termination of Executive’s employment,
this Agreement shall be applied without regard to this
Section 5(d)(vi); and provided further, however, that any
Release previously executed under this Section 5(d)(vi) will
be null and void if the Company reaches a determination of Cause
within the Cause Review Period. If any amount is payable under this
Section 5 because of a separation from service that is not an
“involuntary separation from service” as defined in
Treas. Reg. § 1.409A-1(n)(1) or a separation from service
which, pursuant to Treas. Reg. § 1.409A-1(n)(2) is entitled to
treatment as an “involuntary separation from service”
as so defined, and if a form of release is delivered by the Company
to the Executive within seven (7) days of such separation from
service, then any other provision of this Agreement to the contrary
notwithstanding, any such amount shall not be payable until the
sixtieth day after the date of such separation from service.
(vii) For purposes of this
Agreement, Executive’s employment will not be considered to
have terminated unless, as a result of a termination, Executive has
had a “separation from service” (as that term is
defined in Treas. Reg. § 1.409A-1(h)) with the “Key
Energy Controlled Group.” The term “Key Energy
Controlled Group” means the group of corporations and trades
or businesses (whether or not incorporated) composed of the Company
and every entity or other person which together with the Company
constitutes a single “service recipient” (as that term
is defined in Treas. Reg. § 1.409A-1(g)) as the result of the
application of Treas. Reg. § 1.409A-1(h)(3).
(e) Effect of Termination or
Change in Control upon Equity-Based Incentives.
(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(b) hereof), or in the event the Executive
should terminate his employment for Good Reason, then any
Equity-Based Incentives held by the Executive 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 first anniversary of the effective date of such
termination and (y) the final stated expiration date of the
Equity-Based Incentive. In addition, in the event of such a
termination, any Equity-Based Incentives held by the Executive
which have vested prior to the effective date of such termination
shall remain exercisable until the earlier to occur of (x) the
first anniversary of the effective date of such termination and
(y) the final stated expiration date of the Equity-Based
Incentive.
(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(b) hereof), then effective
upon the date such termination is effective, any Equity-Based
Incentives which have not vested prior to the effective date of
such termination shall be forfeited. Any Equity-Based Incentives
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, any Equity-Based Incentives held by the
Executive which have not vested prior to the effectiv
