Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of October 25, 2008, is
between Natural Gas Services Group, Inc., a Colorado corporation (the
"Company"), and Stephen C. Taylor, an individual residing in Midland, Texas (the
"Employee").

WHEREAS, the Employee has been employed by the Company since January 13, 2005,
and presently serves as President, Chief Executive Officer  and Chairman of the
Board; and

WHEREAS, the Company and the Employee desire for the Company’s employment of the
Employee be subject to the terms and conditions set forth below;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, the
Company and the Employee hereby agree as follows:

1.           Employment.  The Company agrees to employ the Employee, and the
Employee agrees to continue in the employ of the Company, upon the terms and
subject to conditions herein provided.

2.           Term.  The employment of the Employee shall be for a period
(referred to herein as the "Employment Term") commencing on the date of this
Agreement and ending on the earlier of:  (i) the effective date of any
"Fundamental Change" with respect to the Company or with respect to the
Employee; (ii) the date of termination of Employee's employment pursuant to
Section 5 hereof; or (iii) the fifth anniversary of the date of this Agreement.

For purposes hereof, a "Fundamental Change" shall occur with respect to:  (i)
the Company on the effective date of any dissolution, merger, consolidation,
sale of all or substantially all of the Company's assets, recapitalization or
any other type of transaction which results in 50% or more of the Company's
common stock being changed into, or exchanged for, different securities of the
Company, as applicable, or other securities or interests in other persons or
entities, and (ii) the Employee on the effective date of any change in the
duties, functions, responsibilities or authority of the Employee or any decrease
in the base salary, eligible bonus percentage or existing perquisites of the
Employee in effect at that time.

3.           Position and Duties.

(a)          Position.  During the Employment Term, the Employee shall serve as
President, Chief Executive Officer and Chairman of the Board of the Company. In
such capacity, the Employee shall have such duties, functions, responsibilities,
and authority customarily appertaining to the position of president, chief
executive officer and chairman of the board of a corporation; subject, however,
to applicable restrictions imposed by the bylaws of the Company and to the
directives of the Board of Directors of the Company or its Compensation
Committee.

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Exhibit 10.1
 
(b)           Duties.  During the Employment Term, the Employee shall devote his
full time, skill and attention, and his best efforts during normal business
hours to, and in furtherance of, the business and affairs of the Company and its
subsidiaries and affiliates (collectively, the "Related Parties"); except for
usual, ordinary and customary periods of vacation and absence due to illness or
other disability; provided, however, that Employee may, subject to the Company's
code of ethics and conflict of interest policies as in effect from time to time,
devote reasonable periods of time in connection with the following activities,
if such activities do not materially interfere with the performance of
Employee's duties and services hereunder and do not consume more than 10% of
Employee's working hours:

(i)           fulfilling speaking engagements; and

(ii)           engaging in charitable and community activities.

4.           Compensation and Related Matters.

(a)           Base Salary.  Effective January 14, 2008 the Company is paying the
Employee a base salary at the rate of $275,000.00 per annum. This base salary
shall be reviewed at least annually within 15 days of the anniversary date of
the Employee’s date of employment and increases in such base salary may be
granted at the sole discretion of the Board of Directors of the Company or its
Compensation Committee.  If from time to time the Board of Directors of the
Company or its Compensation Committee increases the Employee’s base salary, the
increased base salary amount shall become the minimum base salary under this
Agreement.

(b)           Equity Awards.  Company shall award Employee a minimum of 30,000
stock options or equivalent equity awards each year on the anniversary of
Employee’s employment.

(c)           Bonuses.  In addition to base salary, the Employee shall be
entitled to receive on an annual basis during the Employment Term a cash bonus
of up to 50% of the Employee’s base salary, the amount of which will be based
upon and subject to parameters established by the Board of Directors of the
Company or its Compensation Committee. Higher bonus amounts may be awarded at
the discretion of the Company or its Compensation Committee. Any such bonuses
shall be payable to the Employee in the manner specified by the Board of
Directors of the Company or its Compensation Committee at the time any such
bonus is awarded.

(d)           Benefits.  The Employee shall, during the Employment Term, be
eligible to participate in such insurance, medical and other employee benefit
plans, whether now in place or that may be implemented from time to time in the
future, including, but not limited to, retirement (401k) plans, of the Company
which may be in effect, from time to time, to the extent such plans are then
generally available to all employees or to senior management employees of the
Company, with the following considerations:

(i) Company shall pay all monthly premiums for any health insurance plans,
including but not limited to dental and vision plans, and similar benefit plans
the Employee chooses to participate in, provided that said plans are available
through the Company as a customary employee benefit.

 
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Exhibit 10.1
 
 
(ii) Company shall pay premiums for comprehensive term life insurance for the
Employee in coverage amounts equal to three (3) times his annual base salary.

(iii) Company shall pay all costs, fees (professional or otherwise), tests,
prescriptions, hospital charges and any other expenses incurred to cover the
total cost of a comprehensive annual physical examination for Employee.

(e) Director’s and Officer’s Insurance  The Company shall provide Employee with
comprehensive insurance coverage in sufficient amounts relative to his duties as
the Chief Executive Officer and Chairman of the Board of a publicly-held and
listed company.

(f)           Professional Organization Dues.  During the Employment Term, the
Company shall pay the initiation fees and periodic dues for membership in any
professional organizations in which  the Employee is as of the date of this
Agreement a  member,  or  which  are  otherwise  approved  by  the Board of
Directors of the Company or its Compensation Committee, and the Company shall
pay all charges and expenses, including reasonable travel expenses, incurred by
the Employee in connection with membership in such organizations.

 (g)           Company Vehicle.  The Company shall provide a vehicle of the
Employee’s choice for the Employee to use in connection with his employment
obligations with the Company (the value of any such vehicle shall be approved by
the Compensation Committee of the Board of Director’s of the Company). The
Employee shall be able to use the vehicle for personal use as long as said use
is not deemed excessive..

 
(h)           Vacations.  The Employee shall be entitled to five  (5) weeks of
vacation each calendar year, with pay, beginning with calendar year 2008.

(i)           Expenses.  The Employee will be reimbursed for reasonable expenses
incurred in the performance of his duties and services hereunder and in
furtherance of the business of the Company and the Related Parties upon
presentation by the Employee of an itemized account, accompanied by appropriate
receipts satisfactory to the Company.

5.           Termination of Employment.

(a)           The Employee’s employment hereunder:

(i)           shall automatically terminate upon the occurrence of any of the
following: (A) the mental or physical incapacity or inability of the Employee to
perform his duties for a consecutive period of one hundred twenty (120) days or
a non-consecutive period of one hundred eighty (180) days during any twelve
month period; (B) the death of the Employee; or (C) the voluntary resignation or
retirement of the Employee; and

 
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Exhibit 10.1 

(ii)           may be terminated by the Company, at any time, for "cause", which
shall mean by reason of any of the following: (A) the Employee's conviction of,
or plea of nolo contendere to, any felony or to any crime or offense causing
substantial harm to the Company or any of the Related Parties (whether or not
for personal gain) or involving acts of theft, fraud, embezzlement, moral
turpitude or similar conduct; (B) malfeasance in the conduct of the Employee’s
duties, including, but not limited to, (1) willful and intentional misuse or
diversion of any of the Company’s or Related Parties' funds, (2) embezzlement,
or (3) fraudulent or willful and material misrepresentations or concealments on
any written reports submitted to the Company or any of the Related Parties, (C)
material failure to perform the duties of the Employee’s employment or material
failure to follow or comply with the reasonable and lawful written directives of
the Board of Directors of the Company, provided, however, that the Employee
shall have been informed, in writing, of such material failure and given a
period of not more than 60 days to remedy same; or (D) a material breach by the
Employee of the provisions of this Agreement (including, without limitation, any
breach of Section 3(b) of this Agreement).

(b)           If the Employee's employment is terminated by reason of any of the
circumstances set forth in Sections 5(a)(i)(C) or 5(a)(ii), the Employee shall
not be entitled to receive any of the benefits set forth in Section 5(c), unless
otherwise authorized by the Board of Directors of the Company, and all
obligations of the Company and the Employee (except for restrictions pertaining
to confidential or proprietary information) under this Agreement shall
automatically terminate.

(c)           If the Employee’s employment is terminated as the result of a
Fundamental Change with respect to the Company or with respect to the Employee
or for any reason other than as set forth in Sections 5(a)(i)(C) or 5(a)(ii),
the Employee shall, subject to the provisions of Section 5(d), be entitled to
receive from the Company a severance benefit consisting of the following:  (i) a
single lump sum cash payment equal to the amount owed through the remaining term
of this Agreement at the Employee’s base salary as in effect at the date of the
Employee’s termination of employment; provided, however, that such amount shall
not be less than 300% of such annual base salary, which severance benefit shall
be paid no later than thirty (30) days following the Employee’s termination of
employment; (ii) all stock options, restricted stock and/or equity awards of any
kind, whether for common stock, preferred stock, warrants or any other
securities of the Company, owned or due and owing to Employee, shall immediately
vest 100% to Employee on the date of the Employee’s termination of employment;
(iii)  the health care and insurance benefits (e.g., health, dental, vision,
life, disability, etc.) being provided by the Company to the Employee on the
date of the Employee’s termination of employment shall continue in place at no
cost to the Employee for a period of thirty-six (36) months after such
termination date; (iv) the Employee shall be entitled to receive any individual
bonuses or individual incentive compensation not yet paid but due and owing to
the Employee under the Company’s compensation plan or plans for the years prior
to the year of the Employee’s termination of employment, which amounts shall be
paid to the Employee in a single lump sum cash payment no later than thirty (30)
days following the date of the Employee’s termination of employment; (v) the
Employee shall be entitled to receive any bonuses or individual incentive
compensation not yet paid to the Employee under the Company’s compensation plan
or plans equal to the amount owed through the remaining term of this Agreement,
but not less than 300% of the annual bonus or incentive compensation amount,
which bonuses or individual incentive
 
 
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Exhibit 10.1
 
 
compensation shall be calculated as if the Employee had remained employed by the
Company during that period and earned at the maximum award level, and shall be
paid in a single lump sum cash payment to the Employee within 30 days of
Employee’s termination; and (vi)  the Employee shall be entitled to or shall
immediately vest 100% in any and all other compensation plans, bonus plans or
incentive plans, including any owned or due and owing, that Employee
participated in or contributed to at the date of the Employee’s termination of
Employment but that is not covered by (ii) through (v) preceding.
 
(d)           The severance benefit paid to the Employee pursuant to Section
5(c) shall be in consideration of the Employee’s continuing obligations
hereunder after such termination, including, without limitation, the Employee’s
obligations under Section 6.  Further, as a condition to the receipt of such
severance benefit, the Company, in its sole discretion, may require the Employee
to first execute a release, in a form mutually agreeable between the Employee
and the Company, releasing the Company and all Related Parties, and their
officers, directors, employees, and agents, from any and all claims and from any
and all causes of action of any kind or character, including, but not limited
to, all claims and causes of action arising out of the Employee’s employment
with the Company or any of the Related Parties or the termination of the
Employee’s employment.  The performance of the Company’s obligations under
Section 5(c), including the Company’s payment of the severance benefit, shall
constitute full settlement of all such claims and causes of action.  The
Employee’s rights under Section 5(c) are the Employee’s sole and exclusive
rights against the Company and the Related Parties and the Company’s sole and
exclusive liability to the Employee under this Agreement, in contract, tort, or
otherwise, for the termination of the Employee’s employment with the
Company.  The decision as to whether “cause” exists for termination of the
employment relationship of the Employee with the Company and whether and as of
what date the Employee has become incapacitated in the manner described in
Section 5(a)(i) are delegated to the Board of Directors of the Company for
determination.  If the Employee or the Employee’s legal representative, as the
case may be, desire to dispute any determination made by the Board of Directors
of the Company under this Section 5(d), the Employee or his legal
representative, as the case may be, must notify (a “Dispute Notification”) the
Company of such desire within thirty (30) days of the Employee’s receipt of
notification of such a determination by the Board.  Within sixty (60) days of
the Company’s receipt of a Dispute Notification, the parties shall mediate the
dispute in front of an independent mediator acceptable to both the Employee and
the Company and shall work in good faith to resolve the dispute at such
mediation.
 
6.           Business Opportunities and Intellectual Property; Personal
Investments; Covenant not to Compete; Confidentiality.  The Employee
acknowledges that in the course of his employment by the Company and performance
of services on behalf of the Company he will 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
consummation of the Transaction, the Employee hereby agrees as provided below in
this Section

 
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Exhibit 10.1 

(a)           Business Opportunities and Intellectual Property. The Employee:

(i)           shall promptly disclose to the Company all business opportunities
(including, without limitation, those relating to the business of manufacturing,
fabricating, selling, leasing and maintaining of natural gas compressors or the
design and manufacture of natural gas flare systems, components and ignition
systems) developed by the Employee during the Employment Term, or originated by
any third party and brought to the attention of the Employee during the
Employment Term, together with information relating thereto (herein collectively
called "Business Opportunities");

(ii)           shall promptly disclose to the Company any ideas, inventions,
discoveries, processes, designs, methods, substances, articles, computer
programs and improvements, whether or not patentable or copyrightable (all of
the foregoing being hereinafter collectively called "Intellectual Property"),
which the Employee discovers, conceives, invents, creates or develops, alone or
with others, during the Employment Term, if such discovery, conception,
invention, creation or development (A) occurs in the course of the Employee’s
employment with the Company, or (B) occurs with the use of any of the Company’s
or the Related Parties’ time, materials or facilities, or (C) in the opinion of
the Board of Directors of the Company, relates or pertains in any way to the
Company’s or the Related Parties' purposes, activities or affairs;

(iii)                      hereby assigns and agrees to assign to the Company
and its successors, assigns or designees, all of the Employee’s right, title and
interest in and to all Business Opportunities and Intellectual Property that the
Employee is obligated to disclose to the Company pursuant hereto; and

(iv)                      acknowledges and agrees that all Business
Opportunities and Intellectual Property constitute the exclusive property of the
Company and accordingly agrees that Employee will not (directly or indirectly
through any family members), and will not permit any of his controlled
affiliates to, (A) invest or otherwise participate alongside the Company or the
Related Parties in any Business Opportunities, (B) invest or otherwise
participate in any business or activity relating to a Business Opportunity,
regardless of whether the Company or any of the Related Parties ultimately
participates in such business or activity, or (C) use for any purpose other than
on behalf of the Company or the Related Parties, any information pertaining to
Business Opportunities.

(b)           Personal Investments.  Employee agrees that during the Employment
Term, Employee (whether in his own name or in the name of any family members or
made by Employee's controlled affiliates) will not make any investments with or
in any person or entity (other than the Company) which relates to the business
of manufacturing, fabricating, selling, leasing and maintaining of natural gas
compressors or the design and manufacture of natural gas flare systems,
components and ignition systems.

 
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Exhibit 10.1 

(c)           Confidentiality Obligations.  Employee agrees that during the
Employment Term and the Noncompetition Period, Employee will not knowingly use,
publish, disseminate or otherwise disclose, directly or indirectly, to any
person other than the Company or the Related Parties and their respective
officers, directors and employees, any Business Opportunities, Intellectual
Property and any other information heretofore or hereafter acquired, developed
or used by the Company or any of the Related Parties relating to their business
or their operations, properties, prospects, employees, customers, consultants,
vendors, joint venture partners or co-investors which constitutes proprietary or
confidential information of the Company or any of the Related Parties
("Confidential Information"), including, without limitation, any Confidential
Information contained in any customer files, contract files, production records,
maintenance records, reports and related data, memoranda, notes, records,
drawings, manuals, correspondence, financial and accounting information,
customer lists, statistical data and compilations, patents, copyrights,
trademarks, trade names, inventions, formulae, methods, processes, agreements,
contracts, manuals or any other documents relating to the business of the
Company or any of the Related Parties (collectively, the "Company’s Business
Records"), but excluding any Confidential Information which has become part of
common knowledge or understanding in the natural gas compressor industry or
otherwise in the public domain (other than from disclosure by Employee in
violation of this Agreement), provided, however, this paragraph (c) shall not be
applicable to the extent Employee is required to testify in a judicial or
regulatory proceeding pursuant to the order of a judge or administrative law
judge after Employee requests that such Confidential Information be preserved.

(d)           Non-Compete Covenant.  Employee agrees that during the Employment
Term, Employee will not knowingly:

(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, lender, lessor or in any other individual or representative capacity,
in any business activity that relates to (A) the business of manufacturing,
fabricating, selling, leasing and maintaining of natural gas compressors, (B)
the design and manufacture 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 any of the Company or the Related Parties.  The covenant and
restrictions in this Section 6(d) 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 covenant and
restrictions shall not preclude the Employee from engaging or participating in
the above referenced business activities on behalf of any company that conducts
a majority of its business operations outside of the Noncompete Area and whose
principal offices are situated outside of the Noncompete Area, or from:

 
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Exhibit 10.1 

(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 Employee and all
family members and affiliates does not exceed one percent of such company's
outstanding securities; or

(B)           maintaining his personal investments (whether in his own name or
in the name of any family members), if such personal investments and controlled
affiliates do not engage in any business activity that relates to the business
of manufacturing, fabricating, selling, leasing and maintaining of natural gas
compressors, or the design and manufacture of natural gas flare systems,
components and ignition systems, or the installation and servicing of flare
stacks and related ignition and control devices; or

(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 Persons other than
such person or to enter into a relationship with a competitor of the Company or
any of the Related Parties.

(e)           For purposes of this Agreement, the term "Noncompetition Period"
means the period commencing on the date Employee ceases to be employed hereunder
and ending on the second anniversary of such date.

(f)           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.

(g)           Employee 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.

(h)           The provisions of this Section 6 shall survive termination of this
Agreement.

 
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Exhibit 10.1 

(i)            The representations and covenants contained in this Section 6 on
the part of the Employee 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 the Employee in accordance with their terms,
notwithstanding the termination of the Employee's employment hereunder for any
reason or the Company’s breach of any of its obligations under this Agreement.

(j)           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.

7.           Business Records.  The Employee agrees to promptly deliver to the
Company, upon termination of his employment hereunder, or at any other time when
the Company so requests, all of the Company’s Business Records (and all copies
thereof and therefrom). The Employee confirms that all of the Company’s Business
Records (and all copies thereof and therefrom) constitute the exclusive property
of the Company and the Related Parties. The obligation of confidentiality set
forth in Section 6 shall continue notwithstanding the Employee's delivery of any
such documents to the Company. The provisions of this Section 7 shall continue
in effect notwithstanding termination of the Employee's employment hereunder for
any reason.

8.           Divisibility of Agreement.  If any term, condition or provision of
this Agreement is for any reason rendered void, all remaining terms, conditions
and provisions shall remain and continue as valid and enforceable obligations of
the parties hereto.

9.           Notices.  Any notices or other communications required or permitted
to be sent hereunder shall be in writing and shall be duly given if personally
delivered or sent postage pre-paid by certified or registered mail, return
receipt requested, as follows:

 
 (a)
 
 If to Employee:
             
 By:
 
 Stephen C. Taylor
       
4901 Foxboro Ct.
       
Midland, Texas 79705

 
 (b)
 
 If to Company:
             
By:
 
Natural Gas Services Group, Inc.
       
508 W. Wall St., Suite 550
       
Midland, Texas 79701
       
Attn: William F. Hughes, Jr.

 
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Exhibit 10.1 

Either party may change his or its address for the sending of notice to such
party by written notice to the other party sent in accordance with the
provisions hereof.

10.         Complete Agreement.  This Agreement contains the entire
understanding of the parties with respect to the employment of Employee and
supersedes all prior arrangements or understandings with respect thereto and all
oral or written employment agreements or arrangements between the Company (and
any of its subsidiaries) and Employee. This Agreement may not be altered or
amended except by a writing, duly executed by the party against whom such
alteration or amendment is sought to be enforced.

11.         Assignment.  This Agreement is personal and non-assignable by
Employee. It shall inure to the benefit of any corporation or other entity with
which the Company shall merge or consolidate or to which the Company shall lease
or sell all or substantially all of its assets and may be assigned by the
Company to any affiliate of the Company or to any corporation or entity with
which such affiliate shall merge or consolidate or which shall lease or acquire
all or substantially all of the assets of such affiliate.

12.         Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original and all of which together shall constitute one and
the same instrument.

IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement in
multiple counterparts as of the day and year first above written.

   
COMPANY:
             
NATURAL GAS SERVICES GROUP, INC
 
   
By:
 
/s/ William F. Hughes
       
William F. Hughes, Jr.
       
Chairman of the Compensation Committee
of the Board of Directors

                   
 EMPLOYEE:
         
By:
 
/s/ Stephen C. Taylor
       
 Stephen C. Taylor

 
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