Exhibit 10.2

 

WILLIAM M. AUSTIN

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (as from time to time amended in
accordance with the provisions hereof, this “Agreement”), is entered into as of
the 31st day of December, 2007 by and between WILLIAM M. AUSTIN (the
“Executive”) KEY ENERGY SERVICES, INC., a Maryland corporation with executive
offices at 1301 McKinney Street, Suite 1800, Houston, Texas 77010 (the “Parent”)
and KEY ENERGY SHARED SERVICES, LLC, a Delaware limited liability company (the
“Company”).

 

WHEREAS, the Executive and the Parent are parties to the Employment Agreement
dated as of March 1, 2005 (the “Original Employment Agreement”); and

 

WHEREAS, the parties desire to amend and restate the Original Employment
Agreement in order to provide market benefits and to establish consistency among
the executives of the Company in the event of a termination in connection with a
notice of non-renewal of the Agreement; and

 

WHEREAS, the parties desire to amend and restate the Original Employment
Agreement in order to provide for compliance with the provisions of Internal
Revenue Code Section 409A concerning the payment of potential future benefits to
the Executive, including enhanced benefits to the Executive in the event of his
termination in connection with a Change in Control, pursuant to the terms of
Section 5; and

 

WHEREAS, pursuant to the terms of Section 22 hereof, the Parent desires to
assign the Original Employment Agreement to the Company and Company desires to
accept such assignment and to assume the obligations of the Parent under the
Original Employment Agreement, as amended by this Agreement; and

 

WHEREAS, pursuant to the terms of Section 22 and subject to the terms thereof,
the Executive hereby consents to such assignment; and

 

WHEREAS, the Executive is willing to serve as the Company’s President and the
Parent’s Senior Vice President and Chief Financial Officer, pursuant to the
terms and conditions set forth herein;

 

NOW THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the Company and the Executive hereby agree as follows:

 

1.             Employment; Term.

 

(a)                                  Commencing on March 1, 2005, (the
“Commencement Date”) the Company hereby employs the Executive, and the Executive
hereby accepts employment by the Company, as the Company’s President, and the
Parent’s Senior Vice President and Chief Financial Officer. The Executive shall
have the responsibilities, duties and authority commensurate with his positions
as the Senior Vice President and Chief

 

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Financial Officer, including without limitation the general supervision and
control over, and responsibility for, the overall financial and related
activities of the Company 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 January 1, 2010,
unless sooner terminated in accordance with Section 5, and at the close of
business on each anniversary of such date, commencing with January 1, 2010, 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 6
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 Four Hundred
Thirty-Seven Thousand Dollars ($437,000) 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

 

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Salary may be increased (but not decreased) 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 Austin Employment Agreement 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. The Executive’s target
bonus for each fiscal year will be one hundred percent (100%) of Base Salary.

 

(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

 

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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

 

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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. Amended and Restated
Policy Regarding Acquisition, Ownership and Disposition of Company Securities,
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

 

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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,

 

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(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

 

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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 agreements 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.

 

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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 effective date of such
termination shall immediately vest and shall also remain exercisable until the
earlier to occur of (x) the first anniversary of the death of the Executive or
the effective date of such termination and (y) the final stated expiration date
of the Equity-Based Incentives. In addition, in the event of such death or such
a termination, any Equity-Based Incentives held by the Executive which have
vested prior to the effective date of such death or termination shall remain
exercisable until the earlier to occur of (x) the first anniversary of the
effective date of such death or termination and (y) the final stated expiration
date of the Equity-Based Incentives.

 

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(iv)                              In the event of a conflict between the
preceding terms and provisions of this Section 5(e) and any other terms and
provisions governing any Equity-Based Incentives held (now or in the future) by
the Executive (including without limitation the terms and provisions contained
in the agreements and/or plans pursuant to which such Equity-Based Incentives
were (or will in the future be) granted), the preceding terms and provisions of
this Section 5(e) shall control; provided, however, that, if an Equity-Based
Incentive does not by its terms require any exercise, no requirement of exercise
shall be implied from the preceding terms and provisions of this Section 5(e).

 

(v)                                 Anything to the contrary in this Agreement
notwithstanding, the final stated expiration date of an Equity Based Incentive
shall not be extended beyond the tenth anniversary of the date on which such
Equity-Based Incentive was granted.

 

(f)            Continuation of Benefits.

 

(i)                                     Subject to Section 5(f)(ii) hereof, in
the event that Executive’s employment hereunder is terminated by the Executive
for Good Reason or by the Company for Disability or other than for Cause
(including, without limitation, by giving the Executive a Non-Renewal Notice
pursuant to Section 1(b) hereof) and not as a result of the death of the
Executive, the Executive shall continue to be entitled, at the Company’s
expense, to the post-employment benefits under Section 4, if any, that such
benefits provide under their terms for a period of time following the
termination date ending on the first to occur of (I) the second anniversary of
the termination date, (II) the last date of eligibility under the applicable
benefits or (III) the date on which the Executive commences full-time employment
with another employer.  The Company will pay the premiums for COBRA health
coverage for Executive and his covered family members for the period COBRA
provides. At such time as the Company is no longer required to provide the
Executive with life and/or disability insurance, as the case may be, the
Executive shall be entitled, at the Executive’s expense, to convert such life
and disability insurance, as the case may be, into individually owned policies,
except if and to the extent such conversion is not available from the provider
of such insurance.

 

(ii)                                  In the event the Executive’s employment
hereunder is terminated by the Company within one (1) year of a Change in
Control (other than a termination because of the Executive’s death) or is
terminated by the Company other than for Cause in anticipation of a Change in
Control, the Company shall pay to the Executive, in lieu of providing the
benefits contemplated by Section 5(f)(i) above, an amount in cash equal to the
aggregate reasonable expenses that the Company would incur if it were to provide
such benefits for a period of time following the termination date ending on the
second anniversary of the termination date, which amount shall be paid in one
lump sum on the date of such termination.

 

(iii)                               In the event the Executive’s employment
hereunder is terminated by reason of death, the Executive’s spouse and her
dependents shall be entitled at the Company’s expense to continued health
coverage under COBRA under the Company’s group medical and dental plans
applicable to executives (with the Company’s payment of premiums lasting for a
period of twenty-four months or such shorter period as COBRA provides because of
replacement coverage).

 

10

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(g)                                 Accrued Compensation. In the event of any
termination of the Executive’s employment for any reason, the Executive (or his
estate) shall be paid (i) any unpaid portion of his Base Salary through the
effective termination date, (ii) for any accrued but unused vacation (payable in
an amount equal to the Base Salary divided by 255 and multiplied by the number
of accrued but unused vacation days), (iii) any prior fiscal year bonus earned,
but not paid (unless Executive resigns without Good Reason or is terminated for
Cause), (iv) any amounts for expense reimbursement and similar items which have
been properly incurred in accordance with the provisions hereof prior to
termination and have not yet been paid, including without limitation any sums
due under Sections 2(c), 2(d), and 4(c) hereof, and (v) any Gross-Up Payment
which may become due under the terms of Section 6 hereof. Such amounts shall be
paid within ten (10) days of the termination date.

 

(h)                                 Director/Officer Resignations. If the
Executive’s employment hereunder shall be terminated by him or by the Company in
accordance with the terms set forth herein, then effective upon the date such
termination is effective, he will be deemed to have resigned from all positions
as an officer and director of the Company and of any of its Subsidiaries, except
as the parties may otherwise agree.

 

6.             Certain Tax Consequences.

 

(a)           Tax Consequences under Section 280G.

 

(i)                                     Whether or not the Executive becomes
entitled to the payments and benefits described in this Section 6, if any of the
payments or benefits received or to be received by the Executive in connection
with a change in ownership or control of the Company, as defined in section 280G
of the Code (a “Statutory Change in Control”), or the Executive’s termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions result in a
Statutory Change in Control or any person affiliated with the Company or such
person) (collectively, the “Severance Benefits “) will be subject to any excise
tax (the “Excise Tax”) imposed under section 4999 of the Code after giving
effect to Section 6(a)(iii), the Company shall pay to the Executive an
additional amount equal to the Excise Tax, plus any amount necessary to “gross
up” the Executive for additional taxes resulting from the payments to the
Executive by the Company under this Section 6(a)(i) (the “Excise Tax Payment”).
Each Excise Tax Payment shall be made not less than five (5) business days prior
to the due date for payment of the Excise Tax.

 

(ii)                                  Notwithstanding the foregoing, if it shall
be determined that the Executive would be entitled to an Excise Tax Payment, but
that if the Severance Benefits could be reduced by an amount necessary such that
the receipt of the Company Payments would not give rise to any Excise Tax (the
“Reduced Benefits”) and the Reduced Benefits would not be less than ninety
percent (90%) of the Severance Benefits before such reduction, then no Excise
Tax Payment shall be made to the Executive and the Severance Benefits, in the
aggregate, shall be reduced to the Reduced Benefits.  To determine the Reduced
Benefits, payments shall be reduced in the following order (1) acceleration of
vesting of any stock options for which the exercise price exceeds the then fair
market value, (2) any cash severance based on a multiple of Base Salary or
Bonus,

 

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(3) any other cash amounts payable to the Executive, (4) any benefits valued as
parachute payments; and (5) acceleration of vesting of any equity not covered by
(1) above, unless the Executive elects another method of reduction by written
notice to the Company prior to the change of ownership or effective control.

 

(iii)          For purposes of determining whether any of the Severance Benefits
will be subject to the Excise Tax and the amount of such Excise Tax:

 

(A)      all of the Severance Benefits shall be treated as “parachute payments”
within the meaning of Code section 280G(b)(2) if the aggregate present value
(determined as provided in Code Section 280G(d)(4)) of such Severance Benefits
equals or exceeds three times the Executive’s “Base Amount” (within the meaning
of Code Section 280G(b)(3)), and all “excess parachute payments” within the
meaning of Code section 280G(b)(1) shall be treated as subject to the Excise
Tax, unless the Executive receives a written opinion from a nationally
recognized law or accounting firm (“280G Advisers”) selected by the Compensation
Committee or the Board, and reasonably acceptable to the Executive, that such
other payments or benefits (in whole or in part) do not constitute parachute
payments, including by reason of Code section 280G(b)(4)(A), or such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered, within the meaning of Code section 280G(b)(4)(B), in
excess of the “Base Amount” as defined in Code section 280G(b)(3) allocable to
such reasonable compensation, or are otherwise not subject to the Excise Tax;
and

 

(B)        the value of any non-cash benefits or any deferred payment or benefit
shall be determined by a certified public accountant or appraisal company of
recognized national standing forming part of or selected by the 280G Advisers
and reasonably acceptable to the Executive, in accordance with the principles of
Code section 280G(d)(3) and (4).

 

(iv)          In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder, the Executive shall repay to
the Company, at the time that the amount of such reduction in Excise Tax is
finally determined (the “Reduced Excise Tax”), an amount (the “Gross-Up
Repayment”) equal to the sum of (A) the difference of the Excise Tax Payment and
the Reduced Excise Tax plus (B) an amount representing the difference between
(1) the amount paid by the Company to the Executive to “gross up” the Executive
for taxes on payments made by the Company to the Executive in respect of the
Excise Tax and (2) the amount which should have been paid to the Executive by
the Company to “gross up” the Executive for taxes on payments made by the
Company to the Executive in respect of the Reduced Excise Tax; provided,
however, that in no event shall the Gross-Up Repayment exceed the actual
aggregate cash refunds of, or cash reductions in, taxes paid by the Executive by
virtue of paying the Gross-Up Repayment; and provided, further, that if such
refunds or reductions are realized from time to time, the Executive shall make a
repayment to the Company at the time of each such realization equal to the
excess of the Gross-Up Repayment due after giving effect to such realization
over the Gross-Up Repayment due immediately prior to giving effect to such
realization. The Executive shall (1) take such

 

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actions with respect to taxes and tax returns as the Company may from time to
time request in order to obtain such refunds and reductions, including, without
limitation, by taking positions on tax returns and filing amended tax returns,
(2) provide the Company with copies of all tax returns filed by the Executive
which reflect such refunds or reductions or are otherwise requested by the
Company in order to determine the Executive’s compliance with the immediately
preceding clause (1), (3) permit the Company to participate in any proceedings
relating to such refunds and reductions and (4) take all such other actions as
may be reasonably requested by the Company from time to time in connection with
the realization of such refunds or reductions, including, without limitation,
borrowing money from the Company (on terms and conditions reasonably
satisfactory to the Executive and the Company, including, without limitation,
having the Company make the Executive whole, on an after-tax basis, for any
interest costs) so that the payments made from time to time by the Executive to
the Company hereunder maximize (to the extent reasonably possible) such refunds
and reductions, the aggregate amount of such payments by the Executive not to
exceed the Gross-Up Repayment (computed without regard to the provisos to the
first sentence of this Section 6(a)(iv)); provided, however, that the Company
shall bear and directly pay, or shall promptly reimburse the Executive for, all
costs and expenses (including any additional penalties and interest) incurred by
the Executive in connection with any actions taken or omitted by the Executive
in accordance with instructions from the Company pursuant to this sentence, and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including any additional penalties and interest)
imposed as a result of the Company’s payment of such costs and expenses. In the
event that the Excise Tax is subsequently determined to exceed the amount taken
into account hereunder (including by reason of any payment the existence or
amount of which could not be determined at the time of the Excise Tax Payment),
the Company shall make an additional Excise Tax Payment in respect of such
excess (together with any interest or penalties payable by the Executive with
respect to such excess) at the time that the amount of such excess if finally
determined, plus any additional taxes resulting from the payment to the
Executive by the Company for such excess and the interest and penalties thereon.
The Executive and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Severance
Benefits.

 

(v)                                 The Executive shall give the Company written
notice of any determination by the Executive, or any claim by any taxing
authority, that he owes Excise Tax on any Severance Benefit. Such notice shall
be given as soon as practicable but no later than ten (10) business days after
the Executive makes such determination or is informed of such claim, and shall,
to the extent Executive has or may reasonably obtain such information, apprise
the Company of the amount of such Excise Tax and the date on which it is
required to be paid. If the Company gives the Executive written notice at least
thirty (30) days prior to the due date for payment of such Excise Tax, or within
ten (10) business days of having received the foregoing notice from the
Executive (whichever is later), that it disagrees with or wishes to contest the
amount of the Excise Tax, the Company and the Executive shall consult with each
other and their respective tax advisors regarding the amount and payment of any
Excise Tax. In the event there is a contest with any taxing authority regarding
the amount of the Excise Tax, the Company

 

13

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shall bear and pay directly all costs and expenses (including additional
interest, penalties and legal fees) incurred in connection with any such
contest, and shall indemnify and hold the Executive harmless, on an after-tax
basis, to the extent not otherwise paid hereunder, on (x) the Excise Tax Payment
(including any interest and penalties with respect thereto) and (y) the
Company’s payment of the Executive’s costs and expenses hereunder.

 

(b)           Tax Consequences Under Section 409A

 

(i)                                     In the event that any amount arising
from this Agreement is includable in Executive’s gross income for a taxable year
of the Executive under Section 409A of the Internal Revenue Code as the result
of the terms of this Agreement and/or the administration of those terms (“the
Included Amount”) and a 20% additional tax is owed under Section 409A, then the
Company shall pay to the Executive an amount equal to the 20% additional tax
imposed under Section 409A on the Included Amount, together with any
underpayment penalties and interest (the “Additional Tax”) resulting from the
inclusion of the additional amount.  The Company also will pay the Executive an
additional amount necessary to “gross up” the Executive for additional income
taxes on the Additional Tax payment.

 

(ii)                                  The payments required by this
Section 6(b) will be made on the earlier of (a) the thirtieth day following the
date on which it is finally determined by a court or administrative agency that
the Included Amount was includible in Executive’s income as the result of the
application of Section 409A(a)(1)(B) to the Included Amount; or (b) the last day
of the Executive’s taxable year next following the taxable year in which the
Executive remitted the taxes due as the result of the application of
Section 409A(a)(1)(B) to the Included Amount.

 

(iii)                               It shall be a condition precedent to the
Company’s obligations under this Section 6(b) that the Executive (a) has given
the Company written notice of any determination by the Executive, or any claim
by any taxing authority, that he owes Additional Tax as the result of the
inclusion of the Included Amount; (b) that such notice was given as soon as
practicable but no later than ten (10) business days after the Executive makes
such determination or is informed of such claim; (c) that such notice shall, to
the extent Executive has or may reasonably obtain such information, apprise the
Company of the amount of such Additional Tax and the date on which it is
required to be paid. If the Company gives the Executive written notice at least
thirty (30) days prior to the due date for payment of such Additional Tax, or
within ten (10) business days of having received the foregoing notice from the
Executive (whichever is later), that it disagrees with or wishes to contest the
inclusion of the Included Amount and/or the amount of the Additional Tax, the
Company and the Executive shall consult with each other and their respective tax
advisors regarding the amount and payment of any Additional Tax, and it shall be
a further condition precedent to the Company’s obligations hereunder that the
Executive will take all reasonable steps requested by the Company to contest the
inclusion of the Included Amount and/or the amount of the Additional Tax
resulting from such inclusion, provided that in the event there is a contest
with any taxing authority regarding the inclusion and/or the amount of the
Additional Tax, the Company

 

14

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shall bear and pay directly all costs and expenses (including additional
interest, penalties and legal fees) incurred in connection with any such
contest, and shall indemnify and hold the Executive harmless, on an after-tax
basis, to the extent not otherwise paid hereunder, on the Additional Tax
(including any interest and penalties with respect thereto) and the Company’s
payment of the Executive’s costs and expenses hereunder.

 

7.                                       Limitation on Competition.

 

The Executive acknowledges that he will have continuing access to the financial
and other confidential information of the Company.  As an agreement ancillary to
the receipt of such information and the other undertakings in this Agreement,
the Executive covenants as follows:

 

During the Employment Period, and for such period thereafter (A) as the
Executive is entitled to receive severance compensation under this Agreement, or
(B) in the event payment of Enhanced Severance compensation is paid, for a
period of three (3) years following the end of the Employment Period, or (C) in
the event the Executive’s employment is terminated by the Company for Cause or
the Executive terminates his employment for any reason other than Good Reason
(including, without limitation, by giving the Company a Non-Renewal Notice
pursuant to Section 1(b) hereof), for a period of twelve months following the
Employment Period:

 

(a)                                  the Executive shall not, directly or
indirectly, without the Company’s prior written consent, participate or engage
in, whether as a director, officer, employee, advisor, consultant, investor,
lender, stockholder, partner, joint venturer, owner or in any other capacity,
any Competitive Business (as defined below) conducted in any Competitive Market
Area (as defined below); provided, however, that the Executive shall not be
deemed to be participating or engaging in any such business solely by virtue of
his ownership of not more than five percent of any class of stock or other
securities which is publicly traded on a national securities exchange or in a
recognized over-the-counter market;

 

(b)                                 the Executive shall not, without the
Company’s prior written consent, (i) solicit (other than by way of generalized
employment advertising undertaken in the ordinary course of business) the
service of or employ any employee of the Key Companies for the Executive’s own
benefit or for the benefit of any person or entity other than the Key Companies,
(ii) induce any such employee to leave employment with the Key Companies, or
(iii) employ or cause any other person or entity other than the Key Companies to
employ any former employee of the Key Companies whose termination of employment
with the Key Companies occurred less than six (6) months prior to such
employment by the Executive or such other person or entity; and

 

(c)                                  the Executive shall not, without the
Company’s prior written consent, (i) induce or attempt to induce any customer,
supplier or contractor of the Company to terminate or breach any agreement or
arrangement with the Key Companies or otherwise to cease doing business with the
Key Companies, or (ii) induce or attempt to induce any customer, supplier or
contractor of the Key Companies (including any prospective customer, supplier or
contractor which the Key Companies is actively

 

15

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pursuing prior to the Executive’s termination of employment), not to enter into
any agreement or arrangement with the Key Companies or not to do business with
the Key Companies.

 

As used herein, the term “Competitive Business” shall mean any business:
(1) that is competitive with any business (A) which was conducted by the Company
or any of its affiliated companies on the date of termination of Executive’s
employment hereunder or (B) which, on the date of such termination or during the
twelve months immediately preceding such termination, the Company or any of its
affiliated companies was actively investigating with a view to conducting or was
actively pursuing a plan to conduct; and (2) from which the Company and such
affiliated companies derive (or reasonably expect to derive) annual revenues of
not less than $1,000,000. As used herein, the term “Competitive Market Area”
shall mean any geographic market area (1) if the Company or any of its
affiliated companies conducted business in such geographic market area during
the Employment Period or on the date of termination of Executive’s employment
hereunder, or (2) if, on the date of such termination or during the twelve
months immediately preceding such termination, the Company or any of its
affiliated companies was actively investigating with a view to conducting
business in such geographic market area or was actively pursuing a plan to
conduct business in such geographic market area.

 

The Executive agrees and acknowledges that a portion of the consideration to be
paid by the Company to the Executive pursuant to this Agreement is in
consideration of the covenants under this Section 7 and that such consideration
is fair and adequate, even though the Executive will not receive any severance
compensation in the event he terminates his employment with the Company other
than for Good Reason or the Company terminates his employment for Cause. The
Executive acknowledges and agrees that any breach or anticipatory breach by him
of any of the provisions of this Section 7 would cause the Company or its
affiliates irreparable injury not compensable by monetary damages alone and
that, accordingly, in any such event, the Key Companies shall be entitled to
injunctions, both preliminary and permanent, enjoining or restraining such
breach or anticipatory breach without the necessity of showing irreparable
injury (and the Executive hereby consents to the issuance thereof without bond
by a court of competent jurisdiction).

 

8.                                       Confidential Information.

 

The Executive acknowledges that during the course of his employment with the
Company he will have access to trade secrets, confidential and proprietary
information and know-how of the Key Companies (“Confidential Information”).
Except in the ordinary course of properly performing his duties for the Company,
the Executive shall not at any time, without the Company’s prior written consent
while employed or after termination of his employment, disclose, communicate or
divulge, or use for the benefit of himself or of any third party, any of the
Confidential Information of the Key Companies. In the event the Executive learns
during his employment with the Company any trade secrets, confidential or
proprietary information or know-how of any customer, supplier or contractor of
the Key Companies, the Executive shall maintain the confidence of such
information.

 

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9.                                       Return of Materials.

 

Upon termination of the Executive’s employment for any reason, the Executive
shall promptly deliver to the Company or, with the Company’s consent, destroy
all documents and other materials in the Executive’s possession or custody
(whether prepared by the Executive or others) that the Executive obtained from
the Key Companies or its customer, supplier or contractor during the Employment
Period and which relate to the past, present or anticipated business and affairs
of the Key Companies, including without limitation, any Confidential
Information.

 

10.                                 Enforceability.

 

If any provision of this Agreement shall be deemed invalid or unenforceable as
written, this Agreement shall be construed, to the greatest extent possible, or
modified, to the extent allowable by law, in a manner which shall render it
valid and enforceable and any limitation on the scope or duration of any such
provision necessary to make it valid and enforceable shall be deemed to be a
part thereof. No invalidity or unenforceability of any provision contained
herein shall affect any other portion of this Agreement unless the provision
deemed to be so invalid or unenforceable is a material element of this
Agreement, taken as a whole.

 

11.                                 Legal Expenses.

 

The Company shall pay the Executive’s reasonable fees for legal and other
related expenses associated with any disputes arising hereunder or under any
other agreements, arrangements or understandings regarding Executive’s
employment with the Company (including, without limitation, all agreements,
arrangements and understandings regarding bonuses, Equity-Based Incentives,
employee benefits or other compensation issues) if either a court of competent
jurisdiction or an arbitrator shall render a final judgment or an arbitrator’s
final decision in favor of the Executive on the issues in such dispute, from
which there is no further right of appeal. If it shall be determined in such
judicial adjudication or arbitration that the Executive is successful on some of
the issues in such dispute, but not all, then the Executive shall be entitled to
receive a portion of such legal fees and other expenses as shall be
appropriately prorated.

 

For purposes of this Section 11, the phrase “reasonable fees for legal and other
related expenses” shall mean only the reasonable fees incurred by the Executive
for legal and other related expenses, to the extent and only to the extent to
which either (a) the reimbursement or payment of such fees and expenses by the
Company does not constitute “compensation” within the meaning of that word where
it appears in the phrase “a legally binding right during a taxable year to
compensation” in the first sentence of Treas. Reg. § 1.409A-1(b)(1); or (b) the
reimbursement or payment of such fees and expenses by the Company is a
settlement or award resolving bona fide legal claims based on wrongful
termination, employment discrimination, the Fair Labor Standards Act, or
worker’s compensation statutes, including claims under applicable Federal,
state, local, or foreign laws, or for reimbursements or payments of reasonable
attorneys fees or other reasonable expenses incurred by a service provider
related to such bona fide legal claims described in Treas. Reg. §
1.409A-1(b)(10).

 

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12.                                 Notices.

 

All notices which the Company is required or permitted to give to the Executive
shall be given by registered or certified mail or overnight courier, with a
receipt obtained, addressed to the Executive at his primary residence, or at
such other place as the Executive may from time to time designate in writing, or
by personal delivery to the Executive, or by facsimile to the Executive with
oral confirmation of his receipt and with a copy immediately sent to the
Executive by first class U.S. Mail, and to counsel for the Executive as may be
requested in writing by the Executive from time to time. All notices which the
Executive is required or permitted to give to the Company shall be given by
registered or certified mail or overnight courier, with a receipt obtained,
addressed to the Company at the address set forth above, or at such other
address as the Company may from time to time designate in writing, or by
personal delivery to the Chief Executive Officer of the Company, or by facsimile
to the Chief Executive Officer with oral confirmation of his receipt and with a
copy immediately sent to the Chief Executive Officer by first class U.S. Mail,
and to counsel for the Company as may be requested in writing by the Company. A
notice will be deemed given upon personal delivery, the mailing thereof or
delivery to an overnight courier for delivery the next business day, or the oral
confirmation of receipt by facsimile, except for a notice of change of address,
which will not be effective until receipt, and except as otherwise provided in
Section 5(a) hereof.

 

13.                                 Waivers.

 

No waiver by either party of any breach or nonperformance of any provision or
obligation of this Agreement shall be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision of this Agreement. Any
waiver of any provision of this Agreement must be in writing and signed by the
party granting the waiver.

 

14.                                 Headings; Other Language.

 

The headings contained in this Agreement are for reference purposes only and
shall in no way affect the meaning or interpretation of this Agreement. In this
Agreement, as the context may require, the singular includes the plural and the
singular, the masculine gender includes both male and female reference, the word
“or” is used in the inclusive sense and the words “including,” “includes,” and
“included” shall not be limiting.  As used herein, the term “Subsidiary” shall
mean any corporation or other entity the voting equity of which the Company or
another Subsidiary holds at least fifty percent.

 

15.                                 Withholding and Timing of Payments.

 

The Executive acknowledges and agrees that any or all payments under this
Agreement may be subject to reduction for tax and other required withholdings. 
Notwithstanding any provision of this Agreement, if the payment of any amount
under this Agreement would cause an amount to be included in Executive’s taxable
income under Section 409A of the Internal Revenue Code because the timing of
such payment is

 

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not delayed as provided in Section 409A(a) (2) (B) of the Internal Revenue Code,
then any such payment that Executive would otherwise be entitled to during the
first six months following the date of Executive’s separation from service shall
be accumulated and paid on the date that is six months after the date of
Executive’s separation from service (or if such payment date does not fall on a
business day of the Company, the next following business day of the Company), or
such earlier date upon which such amount can be paid without causing any amount
to be included in the Executive’s taxable income under Section 409A of the
Internal Revenue Code.

 

16.                                 Counterparts.

 

This Agreement may be executed in duplicate counterparts, each of which shall be
deemed to be an original and all of which, taken together, shall constitute one
agreement.

 

17.                                 Agreement Complete; Amendments.

 

This Agreement, together with the Exhibits hereto, the agreements referred to
herein, and the instruments, agreements, plans, resolutions and other documents
pursuant to which any Equity-Based Incentives are held (now or in the future) by
the Executive, constitutes the entire agreement of the parties with respect to
the subject matter hereof and supersedes all prior agreements, written or oral,
with respect thereto. This Agreement may not be amended, supplemented, canceled
or discharged except by a written instrument executed by both of the parties
hereto, provided, however, that the immediately foregoing provision shall not
prohibit the termination of rights and obligations under this Agreement which
termination is made in accordance with the terms of this Agreement.

 

18.                                 Benefit of the Successors and Permitted
Assigns of the Respective Parties Hereto.

 

This Agreement and the rights and obligations hereunder are personal to the
Company and the Executive and are not assignable or transferable to any other
person, firm or corporation without the consent of the other party, except as
contemplated hereby; provided, however, in the event of the sale, merger or
consolidation of the Company, whether or not the Company is the surviving or
resulting corporation, the transfer of all or substantially all of the assets of
the Company, or the voluntary or involuntary dissolution of the Company, then
the surviving or resulting corporation or the transferee or transferees of the
Company’s assets shall be bound by this Agreement and the Company shall take all
actions necessary to insure that such corporation, transferee or transferees are
bound by the provisions of this Agreement; and provided, further, this Agreement
shall inure to the benefit of the Executive’s estate, heirs, executors,
administrators, personal and legal representatives, distributees, devisees, and
legatees. Notwithstanding the foregoing provisions of this Section 18, the
Company shall not be required to take all actions necessary to insure that a
buyer, survivor, transferee or transferees of the Company’s assets
(“Transferee”) are bound by the provisions of this Agreement and such Transferee
shall not be bound by the obligations of the Company under this Agreement if the
Company shall have (a) paid to the Executive or made provision

 

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satisfactory to the Executive for payment to him of all amounts which are or may
become payable to him hereunder in accordance with the terms hereof and (b) made
provision satisfactory to the Executive for the continuance of all benefits
required to be provided to him in accordance with the terms hereof, in each case
as if the Executive had been terminated without Cause in anticipation of a
Change in Control.

 

19.                                 Governing Law.

 

This Agreement will be governed and construed in accordance with the laws of
Texas applicable to agreements made and to be performed entirely within such
state, without giving effect to any choice or conflicts of laws principles which
would cause the application of the domestic substantive laws of any other
jurisdiction.

 

20.                                 Survival.

 

The covenants, agreements, representations, warranties and provisions contained
in this Agreement that are intended to survive the termination of the
Executive’s employment hereunder and the termination of the Employment Period
shall so survive such termination.

 

21.                                 Interpretation.

 

The terms of this Agreement shall be construed and administered in a manner
calculated to avoid the inclusion of any amount in Executive’s gross income
under Code Section 409A, and any provisions regarding the timing of payments
shall have an effective date of August 1, 2005, as required by Code
Section 409A.

 

The Company and the Executive each acknowledge and agree that this Agreement has
been reviewed and negotiated by such party and its or his counsel, who have
contributed to its revision, and the normal rule of construction, to the effect
that any ambiguities are resolved against the drafting party, shall not be
employed in the interpretation of it.

 

22.                                 Assignment and Assumption of Original
Employment Agreement; Consent to Assignment.

 

The Parent hereby assigns, transfers and conveys to the Company, and the Company
hereby accepts such assignment and assumes the obligations of the Parent
contained in the Original Employment Agreement, as amended by this Agreement. 
In order to induce the Executive to consent to such assignment and assumption,
simultaneously with the execution and delivery of this Agreement, the Parent has
executed and delivered to the Executive the Guaranty dated the date of this
Agreement.  In consideration of the execution and delivery of such Guaranty by
the Parent, and of the terms and provisions of this Agreement, the Executive
hereby consents to such assignment and assumption.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement, this 31st day of
December, 2007.

 

 

THE PARENT:

 

 

 

 

 

KEY ENERGY SERVICES, INC.

 

 

 

 

 

 

 

 

By:

 

/s/ Richard J. Alario

 

 

 

Richard J. Alario

 

 

 

Chairman, President, and Chief

 

 

 

Executive Officer

 

 

 

 

 

 

 

 

THE COMPANY:

 

 

 

 

 

KEY ENERGY SHARED SERVICES, LLC

 

 

 

 

 

 

 

 

By:

 

/s/ Newton W. Wilson III

 

 

 

Newton W. Wilson III

 

 

 

Vice President

 

 

 

 

 

 

 

 

THE EXECUTIVE:

 

 

 

 

 

 

 

 

 

/s/ William Austin

 

 

 

William Austin

 

 

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EXHIBIT A

 

Company Paid Coverages

 

1.                                       Medical and Dental Plan. Comprehensive
medical and dental plans available to the Company’s senior management, pursuant
to which all medical and dental expenses incurred by the Executive, his spouse
and his children will be reimbursed by the Company, through insurance or, in the
absence of insurance, directly by the Company, so that the Executive has no
out-of-pocket cost with respect to such expenses.

 

2.                                       Director and Officer Liability
Insurance.

 

3.                                       Voluntary annual physicals at the
Executive’s option while employed, with a report by the examining physician to
the Board regarding the Executive’s ability to perform job related functions.

 

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EXHIBIT B

 

Definition of “Change in Control” of the Parent

 

The occurrence of any of the following shall constitute a “Change in Control” of
Key Energy Services, Inc. (hereinafter, the “Company”):

 

(a)                                  If any person (as defined in
Section 3(a)(9) of the Securities Exchange Act of 1934, as from time to time in
effect (the “Exchange Act”), or any successor provision), other than the
Company, becomes the beneficial owner directly or indirectly of more than fifty
percent (50%) of the outstanding Common Stock of the Company, determined in
accordance with Rule 13d-3 under the Exchange Act (or any successor provision),
or otherwise becomes entitled to vote more than fifty percent (50%) of the
voting power entitled to be cast at elections for directors (“Voting Power”) of
the Company;

 

(b)                                 If the Company is subject to the reporting
requirements of Section 13 or 15(d) (or any successor provision) of the Exchange
Act, and any person (as defined in Section 3(a)(9) of the Exchange Act, or any
successor provision), other than the Company, purchases shares pursuant to a
tender offer or exchange offer to acquire Common Stock of the Company (or
securities convertible into or exchangeable for or exercisable for Common Stock)
for cash, securities or any other consideration, if after consummation of the
offer, the person in question is tile beneficial owner, directly or indirectly,
of more than fifty percent (50%) of the outstanding Common Stock of the Company,
determined in accordance with Rule 13d-3 under the Exchange Act (or any
successor provision);

 

(c)                                  If the stockholders or the Board approve
any consolidation or merger of the Company (i) in which the Company is not the
continuing or surviving corporation unless such merger is with a Subsidiary at
least fifty percent (50%) of the Voting Power of which is held by the Company or
(ii) pursuant to which the holders of the Company’s shares of Common Stock
immediately prior to such merger or consolidation would not be the holders
immediately after such merger or consolidation of at least a majority of the
Voting Power of the Company;

 

(d)                                 The stockholders or the Board shall have
approved any sale, lease, exchange or other transfer (in one transaction or a
series of transactions) of all or substantially all of the assets of the
Company;

 

(e)                                  Upon the election of one or more new
directors of the Company, a majority of the directors holding office, including
the newly elected directors, were not nominated as candidates by a majority of
the directors in office immediately before such election As used in this
definition of “Change in Control,” “Common Stock” means the Common Stock, or if
changed, the capital stock of the Company as it shall be constituted from time
to time entitling the holders thereof to share generally in the distribution of
all assets available for distribution to the Company’s stockholders after the
distribution to any holders of capital stock with preferential rights.

 

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