Exhibit 10.1
RETIREMENT AGREEMENT
     This Retirement Agreement (“Agreement”), dated as of December 14, 2005, is
made and entered into by and between Wallace C. Sparkman (“Sparkman”), an
individual, and Natural Gas Services Group, Inc. (the “Company”), a Colorado
corporation, acting herein by and through its duly authorized officers.
Recitations
     1. Sparkman serves the Company in the capacities of Chairman of the Board
of Directors, as a member of the Board of Directors of the Company and its
subsidiary, Screw Compression Systems, Inc., and as an employee of the Company.
     2. Sparkman has announced his retirement from all positions he holds with
the Company and Screw Compression Systems, Inc., effective as of December 31,
2005.
     3. In recognition of Sparkman’s many contributions to the Company’s success
and growth, the Company desires to enter into this agreement with Sparkman
pursuant to which Sparkman will receive certain benefits in connection with his
retirement from the Company, all as hereinafter more fully set forth.
Agreement
     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Sparkman and the Company agree as follows:
     1. Sparkman shall receive a final regular bonus to which he is entitled
under and in accordance with the provisions of the Company’s cash bonus program
available to the Company’s officers and selected senior managers. The amount of
the bonus under the cash bonus program will be calculated and treated in
accordance with the terms and conditions of such program. Such payment shall be
reduced by any deductions for federal tax withholding, social security and any
other deductions heretofore authorized by Sparkman. No benefits shall accrue to
Sparkman under such cash bonus program after December 31, 2005.
     2. In addition to the final regular bonus payment to be paid to Sparkman as
provided for in Paragraph 1 above, the Company will also make a one-time cash
payment to Sparkman on or about January 31, 2006 in the amount of Thirty
Thousand and No/100 Dollars ($30,000.00), less deductions for federal tax
withholding, social security and other deductions heretofore authorized by
Sparkman. Such payment includes compensation to Sparkman for unused vacation
time and automobile allowance.

 

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     3. Sparkman shall have the right to take, keep and retain for his sole use
and enjoyment all of his personal furniture and belongings located on the
Company’s premises at 2911 S. County Road 1260, Midland, Texas 79706.
     4. Commencing on December 31, 2005, and ending on June 30, 2006, the
Company will pay for the cost of insurance premiums for supplemental Medicare
insurance covering Sparkman and his wife.
     5. Sparkman will be reimbursed for all customary and normal expenses
reasonably incurred by him on behalf of the Company through December 31, 2005,
promptly upon the presentation of an expense account with proper documentation
for all such expenses.
     6. Sparkman acknowledges that in the course of his employment by the
Company and performance of services on behalf of the Company and its
subsidiaries and affiliates (collectively, the “Related Parties”) he has become
privy to various business opportunities, economic and trade secrets and
relationships of the Company and the Related Parties. Therefore, in
consideration of this Agreement and the compensation to be paid to Sparkman,
Sparkman hereby agrees that during the Noncompetition Period, Sparkman will not
knowingly:
     (a) (i) engage or participate in any manner, whether directly or indirectly
through any family member or as an employee, employer, consultant, agent,
principal, partner, more than one percent shareholder, officer, director,
licensor, lendor, lessor or in any other individual or representative capacity,
in any business activity that relates to (A) the business of designing,
manufacturing, fabricating, selling, leasing, renting and/or maintaining natural
gas compressors, (B) the designing, manufacturing, fabricating, selling, leasing
and/or renting of natural gas flare systems, components and ignition systems,
(C) installing and servicing flare stacks and related ignition and control
devices or (D) in any other business or activity related to the natural gas
compressor industry that is in competition in any manner whatsoever with the
business of the Company or the Related Parties. The covenants and restrictions
in this Section 6 pertain to the geographic areas comprised of (x) Midland and
Ector Counties, Texas, and all counties adjacent to Midland and Ector Counties,
Texas, and (y) Tulsa County, Oklahoma, and all counties adjacent to Tulsa
County, Oklahoma (all of such counties being collectively referred to herein as,
the “Noncompete Area”); provided, however, such covenants and restrictions shall
not preclude Sparkman from:
     (A) making investments in securities of oil and gas companies, oil and gas
service companies, and natural gas compressor companies which are registered on
a national stock exchange, if the aggregate amount owned by Sparkman and his
affiliates does not exceed ten percent of such company’s outstanding securities;
or
     (B) maintaining his personal investments if such personal investments and
controlled affiliates do not engage in any business activity that relates to the
business of designing, manufacturing, fabricating, selling, leasing, renting
and/or maintaining natural gas compressors, or the designing and manufacturing,
fabricating, selling, leasing and/or renting of natural gas flare systems,
components and ignition systems, or the installation and servicing of flare
stacks and related ignition and control devices; or

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     (ii) actively solicit, directly or indirectly, any employee (or person who
within the preceding ninety (90) days was an employee) of the Company or any of
the Related Parties or any other person who is under contract with or employed
by the Company or any of the Related Parties, to terminate his or her employment
by, or contractual relationship with, such person or to refrain from extending
or renewing the same (upon the same or new terms) or to become employed by or to
enter into contractual relations with any person other than such person or to
enter into a relationship with a competitor of the Company or any of the Related
Parties.
     (b) For purposes of this Section 6, the term “Noncompetition Period” means
the period commencing on December 31, 2005 and ending on December 31, 2006.
     (c) The invalidity or non-enforceability of this Section 6 in any respect
shall not affect the validity or enforceability of this Section 6 in any other
respect or of any other provision of this Agreement. If any provision of this
Section 6 shall be held invalid or unenforceable by a court of competent
jurisdiction by reason of the geographic or business scope or the duration
thereof, such invalidity or unenforceability shall attach only to the scope or
duration of such provision and shall not affect or render invalid or
unenforceable any other provision of this Agreement, and, to the fullest extent
permitted by law, this Agreement shall be construed as if the geographic or
business scope or the duration of such provision had been more narrowly drafted
so as not to be invalid or unenforceable.
     (d) Sparkman acknowledges that the Company’s remedy at law for any breach
of the provisions of this Section 6 is and will be insufficient and inadequate
and that the Company shall be entitled to equitable relief, including by way of
temporary and permanent injunction, in addition to any remedies the Company may
have at law.
     (e) The representations and covenants contained in this Section 6 on the
part of Sparkman will be construed as ancillary to and independent of any other
provision of this Agreement. The provisions of this Section 6 shall continue to
be binding upon Sparkman in accordance with their terms, notwithstanding
Sparkman’s retirement.
     (f) The parties to this Agreement agree that the limitations contained in
this Section 6 with respect to time, geographical area and scope of activity are
reasonable. However, if any court shall determine that the time, geographical
area or scope of activity of any restriction contained in this Section 6 is
unenforceable, it is the intention of the parties that such restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable.

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     7. By his execution hereof and in further consideration for the retirement
benefit payments, Sparkman, for himself, his heirs, executors, administrators
and assigns, does hereby remise, release and forever discharge the Company, its
directors, officers, employees, representatives and agents, from any and all
manner or causes of actions, suits, debts, promises, damages, judgments,
executions, claims, guaranties, warranties and demands related to or arising out
of this Agreement or Sparkman’s employment or service as an employee or Director
through December 31, 2005, in law, or in equity, which he ever had, now has or
which he, his heirs, executors, administrators, assigns or successors hereafter
can, shall or may have for, upon or by reason of any matter, cause or thing
whatsoever.
     8. Sparkman agrees, in partial consideration for the above, that he will
fully cooperate with management of the Company in their efforts to manage the
affairs of the Company and in the conduct of the business of the Company,
further agreeing that from and after December 31, 2005, he will not, directly or
indirectly, take any action or assist or encourage any other parties in taking
any action which may be detrimental or adverse to the best interests of the
Company or its subsidiaries or affiliated entities.
     9. A waiver by either party of a breach or violation of any provision of
this Agreement shall not operate as or be construed to be a waiver of any
subsequent breach hereof.
     10. If any of the provisions of this Agreement conflict with the laws under
which this Agreement is to be construed, or if any such provision is held to be
invalid by a court of competent jurisdiction, such provision shall be deleted
from this Agreement and the Agreement shall be construed to give effect to the
remaining provisions hereof.
     11. The rights and obligations of each party under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
the parties. Sparkman shall not assign or alienate any of his interest in this
Agreement without the prior written consent of the Company.
     12. This instrument constitutes the entire agreement and understanding of
the parties with respect to retirement benefits payable to Sparkman. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such matters and may not be changed or terminated orally, and no
change, termination or attempted waiver of any of the provisions hereof shall be
binding unless in writing and signed by the party against whom the same is
sought to be enforced.
     13. This Agreement may be executed by the Company and Sparkman in
counterparts, each of which shall be deemed an original instrument but all of
which together shall constitute one and the same instrument.

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     IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

              NATURAL GAS SERVICES GROUP, INC.
 
       
 
  By:        /s/ Stephen C. Taylor
 
       
 
           Stephen C. Taylor, President and
 
           Chief Executive Officer
 
       
 
           /s/ Wallace C. Sparkman
 
       
 
           Wallace C. Sparkman

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