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


 

















 


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


 


7

















 


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).


 


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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,


 


11

















 


(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


 


12

















 


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

















 


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

















 


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

















 


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.


 


16

















 


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).


 


17

















 


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


 


18

















 


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


 


19

















 


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.


 


20

















 


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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