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Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "
Agreement "), is made and entered into on December 29,
2006 but effective as of December 31, 2006 (the " Effective
Date "), by and between BASIC ENERGY SERVICES, INC., a Delaware
corporation (hereafter " Company "), and Dub William
Harrison (hereafter " Executive "), an individual and
resident of Texas. The Company and Executive may sometimes
hereafter be referred to singularly as a " Party " or
collectively as the " Parties ."
W I T N E S S E T H:
WHEREAS, the Company desires to
continue to secure the employment services of Executive subject to
the terms and conditions hereafter set forth; and
WHEREAS, the Executive is willing
to enter into this Agreement upon the terms and conditions
hereafter set forth;
NOW, THEREFORE, in consideration
of Executive’s employment with the Company, and the premises
and mutual covenants contained herein, the Parties hereto agree as
follows.
1. Employment. During
the Employment Period (as defined in Section 4 hereto), the
Company shall employ Executive, and Executive shall serve as, Vice
President, Equipment and Safety of the Company. Executive’s
principal place of employment shall be at the main corporate
offices of the Company in Midland, Texas.
2. Compensation.
(a) Salary . The
Company shall pay to Executive during the Employment Period a base
salary of $150,000.00 per year, as adjusted pursuant to the
subsequent provisions of this paragraph (the " Base Salary
"). The Base Salary shall be payable in accordance with the
Company’s normal payroll schedule and procedures for its
executives. The Base Salary shall be subject to at least annual
review and may be increased (but not decreased without
Executive’s express consent) by the Compensation Committee
(the " Compensation Committee ") of the Board of Directors
of the Company (the " Board ") at any time. Nothing
contained herein shall preclude the payment of any other
compensation to Executive at any time.
(b) Bonus . In
addition to the Base Salary in Section 2(a) , for each
annual period commencing on the Effective Date until the last day
of the Employment Period (as defined in Section 4 )
(each such annual period being referred to as a " Bonus
Period "), Executive shall be entitled to a bonus equal to a
percentage of Executive’s Base Salary paid during each such
one (1) year period (such bonus, including any applicable
bonuses under any quarterly bonus plan or program during such
period are referred to herein collectively as the " Bonus
"); provided, however , Executive shall be entitled to the
Bonus only if Executive has met the performance criteria set by the
Compensation Committee for the applicable period. In the event that
the Employment Period ends before the end of the Bonus Period,
Executive shall be entitled to a pro rata portion of the Bonus for
that year (based on the number of days in which he was employed
during the year divided by
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365) as determined based on satisfaction of the performance
criteria for that period on a pro rata basis, unless Executive was
terminated for Cause (as defined in Section 6(d) ) or
terminated his employment as a Voluntary Termination (as defined in
Section 6(d) ) in which event he shall not be entitled
to any Bonus for that year. Executive acknowledges that the amount
and performance criteria for Executive’s Bonus to be earned
for each Bonus Period shall be set by the Compensation Committee or
the Board of Directors of the Company. Upon completion of the
criteria for the applicable Bonus Period, such criteria shall be
communicated to Executive in writing. If Executive successfully
meets the performance criteria established by the Compensation
Committee, Employer shall pay Executive the earned Bonus amount
within 30 days after receipt of the Company’s audited
financial reports for the calendar year in which the Bonus is
calculated or, with respect to any payments under a quarterly bonus
plan or program, within the period applicable to such plan or
program; provided , in the event of a termination due to
death, Disability (as defined in Section 6(d) ) or
Retirement (as defined in Section 6(d) ) of Executive,
or Good Reason (as defined in Section 6(d) ) by
Executive, any pro rata portion shall be paid as soon as reasonably
practical to Executive or Executive’s spouse or legal
representative based upon Executive’s and the Company’s
performance through the month immediately preceding such death,
Disability, Retirement or Good Reason termination. In all matters
related to the determination of the earned Bonus (including the
determination of a pro rata amount), the good faith determination
of the Compensation Committee shall be deemed conclusive.
(c) Stock Options .
Executive shall be eligible from time to time to receive grants of
stock options and other long-term equity incentive compensation, as
commensurate with his executive position, under the terms of the
Company’s equity compensation plans.
3. Duties and
Responsibilities of Executive. During the Employment Period,
Executive shall devote his services full-time to the business of
the Company and perform the duties and responsibilities assigned to
him under the Company’s Bylaws or by the Board, or as a
member of the Board, to the best of his ability and with reasonable
diligence. In determining Executive’s duties and
responsibilities, the Board shall not assign duties and
responsibilities to Executive that are inappropriate for his
position as Vice President, Equipment and Safety. This
Section 3 shall not be construed as preventing
Executive from (a) engaging in reasonable volunteer services
for charitable, educational or civic organizations, or
(b) investing his assets in such a manner that will not
require a material amount of his time or services in the operations
of the businesses in which such investments are made; provided,
however , no such other activity shall conflict with
Executive’s loyalties and duties to the Company. Executive
shall at all times use his best efforts to in good faith comply
with United States laws applicable to Executive’s actions on
behalf of the Company and its Affiliates (as defined in
Section 6(d) ). Executive understands and agrees that
he may be required to travel from time to time for purposes of the
Company’s business.
4. Term of
Employment. Executive’s initial term of employment with
the Company under this Agreement shall be for the period from the
Effective Date through December 31, 2007 (the " Initial
Term of Employment "). Thereafter, the employment period
hereunder shall be automatically extended repetitively for an
additional one (1) year period on
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January 1, 2008, and each one-year anniversary thereof,
unless Notice of Termination (pursuant to Section 7 )
is given by either the Company or Executive to the other Party at
least 90 days prior to the end of the Initial Term of
Employment, or any one-year extension thereof, as applicable, that
the Agreement will not be renewed for a successive one-year period
after the end of the current period. The Company and Executive
shall each have the right to give Notice of Termination at will,
with or without cause, at any time subject, however, to the terms
and conditions of this Agreement regarding the rights and duties of
the Parties upon termination of employment. The Initial Term of
Employment, and any one-year extension of employment hereunder,
shall each be referred to herein as a " Term of Employment
." The period from the Effective Date through the date of
Executive’s termination of employment for whatever reason
shall be referred to herein as the " Employment Period
."
5. Benefits. Subject
to the terms and conditions of this Agreement, during the
Employment Period, Executive shall be entitled to all of the
following:
(a) Reimbursement of
Business Expenses. The Company shall pay or reimburse
Executive for all reasonable travel, entertainment and other
expenses paid or incurred by Executive in the performance of his
duties hereunder in accordance with the Company’s policies in
effect from time to time. The Company shall also provide Executive
with suitable office space, including staff support, and paid
parking. In addition, subject to prior approval of the Compensation
Committee, the Company shall pay the membership fees and dues for
Executive to be a member of a luncheon club as appropriate for his
position.
(b) Other Employee
Benefits. Executive shall be entitled to participate in,
and shall participate in coverage under, any employee benefits
plans or programs of the Company to the same extent as available to
any other employees of the Company under the terms of such plans or
programs.
(c) Paid Time Off Days and
Holidays. Executive shall be entitled to accrue paid time
off (" PTO ") days in each calendar year determined in
accordance with the Company’s PTO policy or plans for
employees of the Company as in effect from time to time. Executive
shall also be entitled to all paid holidays and personal days given
by the Company to any of its other employees.
6. Rights and Payments
upon Termination. The Executive’s right to compensation
and benefits for periods after the date on which his employment
with the Company terminates for whatever reason (the "
Termination Date "), shall be determined in accordance with
this Section 6 as follows:
(a) Minimum
Payments. Executive shall be entitled to the following
minimum payments under this Section 6(a) , in addition
to any other payments or benefits to which he is entitled to
receive under the terms of any employee benefit plan or program or
Section 6(b) or Section 8 .
(1) his accrued but unpaid salary
through his Termination Date;
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(2) his unused PTO days which have
accrued through his Termination Date; and
(3) reimbursement of his
reasonable business expenses that were incurred but unpaid as of
his Termination Date.
Such salary and accrued PTO days
shall be paid to Executive within 15 days following the
Termination Date in a cash lump sum less applicable withholdings.
Business expenses shall be reimbursed in accordance with the
Company’s normal procedures.
(b) Severance
Payments. In the event that during the Term of Employment
(i) Executive’s employment is terminated by the Company for
any reason except due to a termination by the Company for Cause (as
defined in Section 6(d) ), or (ii) Executive
terminates his own employment hereunder for Good Reason or
Retirement (as such terms are defined in Section 6(d)
), the following severance benefits shall be provided to Executive
or, in the event of his death before receiving all such benefits,
to his Designated Beneficiary (as defined in
Section 6(d) ) following his death:
(1) The Company shall pay to
Executive as additional compensation (the " Additional
Payment "), an amount which is equal to "Total Cash" (defined
below). " Total Cash " means 0.75 times the sum of
(A) Executive’s annual Base Salary (as in effect
immediately prior to his Termination Date) plus
(B) Executive’s current annual incentive target Bonus (
Section 2(b) ) for the full year in which the
termination of employment occurred; provided , in the event
of a Change in Control and a termination of Executive by the
Company without Cause, by Executive for Good Reason or for
Retirement within the six (6) months preceding or the
12 months following a Change in Control, "Total Cash" shall be
calculated as one (1) times the sum of
(A) Executive’s annual Base Salary (as in effect
immediately prior to his Termination Date) plus (B) the
higher of (x) Executive’s current annual incentive
target Bonus ( Section 2(b) ) for the full year in
which the termination of employment occurred or (y) the
highest annual incentive Bonus received by Executive with respect
to any of the last three completed fiscal years. The Company shall
make the Additional Payment to Executive in a cash lump sum not
later than 60 calendar days following the Termination Date and, if
applicable with respect to a Change in Control that occurs within
six (6) months after a Termination Date, the Company shall
make a payment equal to the positive difference, if any, of the
Additional Payment due under this Section 6(b)
applicable to the Change in Control less the Additional Payment
previously made pursuant to this Section 6(b) prior to
the Change in Control.
(2) Following the
Executive’s Termination Date, the Company shall provide
continued group health coverage (including payment of premiums and
any applicable federal and state withholding taxes based on the
premiums paid) to the Executive and his covered spouse and
dependents under the Consolidated Omnibus Budget Reconciliation Act
of 1985 (" COBRA "), provided the Executive makes timely
election of such coverage. Company shall continue to
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provide such COBRA coverage at no cost to the Executive until
the Executive becomes eligible for group health coverage under
another employer’s plan with comparable benefits or for
18 months, whichever is less. Upon his acceptance of
employment with another employer, Executive will be obligated to
notify the Company of such acceptance of employment and to provide
to the Company a copy of the summary plan description of the new
employer’s group health plan and a schedule showing the
required employee contributions for participation in the plan. In
the event of any change to the provisions of the Company’s
group health plan following the Executive’s Termination Date,
Executive and his spouse and dependents, as applicable, shall be
treated consistently with the then-current officers of the Company
(or its successor) with respect to the terms and conditions of
coverage and other substantive provisions of the plan. Executive
and his spouse hereby agree to acquire and maintain any and all
coverage that either or both of them are entitled to at any time
during their lives under the Medicare program or any similar
program of the United States or any agency thereof (hereinafter
referred to as " Medicare "). The coverage described in the
immediately preceding sentence includes, without limitation, parts
A and B of Medicare and any additional parts of Medicare available
to them at any time. Executive and his spouse further agree to pay
any required premiums for Medicare coverage from their personal
funds.
In the event that
(i) Executive voluntarily resigns or otherwise voluntarily
terminates his own employment, except for Good Reason (as defined
in Section 6(d) ) or Retirement (as defined in
Section 6(d) ), or (ii) Executive’s
employment is terminated by the Company for Cause (as defined in
Section 6(d) ), then in either such event, the Company
shall have no obligation to provide the severance benefits
described in paragraphs (1) and (2) (above) of this
Section 6(b) , except to offer COBRA coverage (as
required by applicable law). Executive shall still be entitled to
the minimum benefits provided under Section 6(a) . The
severance payments provided under this Agreement shall supersede
and replace any severance payments under any severance pay plan
that the Company or any Affiliate maintains for employees
generally.
(c) Notwithstanding any provision
of this Agreement to the contrary, in order to receive the
severance benefits payable under either Section 6(b) or
Section 8 , as applicable, the Executive must first
execute an appropriate release agreement (on a form provided by the
Company) whereby the Executive agrees to release and waive, in
return for such severance benefits, any claims that he may have
against the Company including, without limitation, for unlawful
discrimination (such as Title VII of the Civil Rights Act);
provided, however, such release agreement shall not release any
claim by Executive for any payment or benefit that is due under
either this Agreement or any employee benefit plan until fully
paid.
(d) Definitions.
(1) " Affiliate " means any
entity in which the Company has a 50% or greater capital, profits
or voting interest.
(2) " Cause " means any of
the following:
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(A) the Executive’s conviction by a court of
competent jurisdiction as to which no further appeal can be taken
of a crime involving moral turpitude or a felony or entering the
plea of nolo contendere or settlement agreement to such
crime by the Executive; provided , any conviction, plea or
settlement for a crime other than a crime involving moral turpitude
by the Executive must also reasonably be expected to have a
material adverse effect on the business (including public share
price) or reputation of the Company or any Affiliate;
(B) the commission by the Executive of a material act of
fraud upon the Company or any Affiliate;
(C) the material misappropriation of funds or property of
the Company or any Affiliate by the Executive;
(D) the knowing engagement by the Executive, without the
written approval of the Board or Compensation Committee in any
material activity which directly competes with the business of the
Company or any Affiliate, or which the Board or the Compensation
Committee determines in good faith would directly result in a
material injury to the business or reputation of the Company or any
Affiliate; or
(E) (i) the material breach by Executive of any material
provision of this Agreement, or (ii) the willful, material and
repeated nonperformance of Executive’s duties to the Company
or any Affiliate (other than by reason of Executive’s illness
or incapacity), but only under clause (E) (i) or (E)
(ii) after written notice from the Board or Compensation
Committee of such material breach or nonperformance (which notice
specifically identifies the manner and sets forth specific facts,
circumstances and examples in which the Board or Compensation
Committee believes that Executive has breached the Agreement or not
substantially performed his duties) and his continued willful
failure to cure such breach or nonperformance within the time
period set by the Board or Compensation Committee but in no event
less than thirty (30) business day after his receipt of such
notice; and, for purposes of this clause (E), no act or failure to
act on Executive’s part shall be deemed "willful" unless it
is done or omitted by Executive without his reasonable belief that
such action or omission was in the best interest of the Company.
Assuming disclosure of the pertinent facts, any action or omission
by Executive after consultation with, and in accordance with the
advice of, legal counsel reasonably acceptable to the Company shall
be deemed to have been taken in good faith and to not be willful
under this Agreement.
(4) " Change in Control "
of the Company means the occurrence of any one of the following
events:
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(A) The acquisition by any
individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the " Exchange Act ") (a " Person
")) of beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of 50% or more of either (i) the then
outstanding shares of common stock of the Company (the "
Outstanding Company Stock ") or (ii) the combined
voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors
(the " Outstanding Company Voting Securities ");
provided, however, the following acquisitions shall not
constitute a Change in Control; (i) any acquisition directly
from the Company or any subsidiary thereof (a " Subsidiary
"), (ii) any acquisition by the Company or any Subsidiary, or
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Subsidiary, (iii) any
acquisition by any corporation pursuant to a reorganization,
merger, consolidation or similar business combination involving the
Company (a " Merger ") which for purposes of this definition
of Change in Control, shall be subject to paragraph (b)
(below) or (iv) the current ownership or any subsequent
acquisitions of Outstanding Company Stock by Credit Suisse First
Boston and any of its Affiliates, including without limitation any
of the "DLJ Parties" (as defined under the Amended and Restated
Stockholders’ Agreement dated as of October 3, 2003, by
and among the Company and the other stockholders of the Company
party thereto) and their Affiliates; or
(B) Approval by the shareholders
of the Company of a Merger, unless immediately following
such Merger, substantially all of the holders of the Outstanding
Company Voting Securities immediately prior to Merger beneficially
own, directly or indirectly, more than 50% of the common stock of
the corporation resulting from such Merger (or its parent
corporation) in substantially the same proportions as their
ownership of Outstanding Company Voting Securities immediately
prior to such Merger; or
(C) The sale or other disposition
of all or substantially all of the assets of the Company, unless
immediately following such sale or other disposition, substantially
all of the holders of the Outstanding Company Voting Securities
immediately prior to the consummation of such sale or other
disposition beneficially own, directly or indirectly, more than 50%
of the common stock of the corporation acquiring such assets in
substantially the same proportions as their ownership of
Outstanding Company Voting Securities immediately prior to the
consummation of such sale or disposition.
(5) " Code " means the
Internal Revenue Code of 1986, as amended, or its successor.
References herein to any Section of the Code shall include any
successor provisions of the Code.
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(6) " Disability " shall
mean that Executive is entitled to receive long-term disability ("
LTD ") income benefits under the LTD plan or policy
maintained by the Company that covers Executive. If, for any
reason, Executive is not covered under such LTD plan or policy,
then "Disability" shall mean a "permanent and total disability" as
defined in Section 22(e)(3) of the Code and Treasury
regulations thereunder. Evidence of such Disability shall be
certified by a physician acceptable to both the Company and
Executive. In the event that the Parties are not able to agree on
the choice of a physician, each shall select one physician who, in
turn, shall select a third physician to render such certification.
All costs relating to the determination of whether Executive has
incurred a Disability shall be paid by the Company. Executive
agrees to submit to any examinations that are reasonably required
by the attending physician or other healthcare service providers to
determine whether he has a Disability.
(7) " Designated
Beneficiary " means the Executive’s surviving spouse, if
any. If there is no such surviving spouse at the time of
Executive’s death, then the Designated Beneficiary hereunder
shall be Executive’s estate.
(8) " Good Reason " means
the occurrence of any of the following events, except in connection
with termination of the Executive’s employment for Cause or
Disability, without Executive’s express written consent:
(A) A reduction in
Executive’s Base Salary pursuant to Section 2(a)
;
(B) A relocation of more than
fifty (50) miles of Executive’s principal office with
the Company or its successor;
(C) A substantial and adverse
change in the Executive’s duties, control, authority, status
or position, or the assignment to the Executive of duties or
responsibilities which are materially inconsistent with such status
or position, or a material reduction in the duties and
responsibilities previously exercised by the Executive, or a loss
of title, loss of office, loss of significant authority, power or
control, or any removal of Executive from, or any failure to
reappoint or reelect him to, such positions, except in connection
with the termination of his employment by the Company for Cause (as
described in Section 6(d) ) (provided, a change in
reporting relationships alone shall not cons
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