Document:

Exhibit 10.1

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT  AGREEMENT (this  "Agreement"),  dated as of August 24,
2005, is between Natural Gas Services Group,  Inc., a Colorado  corporation (the
"Company"), and Stephen C. Taylor, an individual residing in Midland, Texas (the
"Employee").

WHEREAS,  the Employee was employed by the Company on January 13, 2005,  and was
appointed by the Board of  Directors  of the Company to serve as  President  and
Chief Executive Officer on January 20, 2005; and

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

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

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

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

         For purposes  hereof,  a "Fundamental  Change" shall occur with respect
to:  (i)  the  Company  on  the  effective  date  of  any  dissolution,  merger,
consolidation,  sale  of all or  substantially  all  of  the  Company's  assets,
recapitalization  or any other type of transaction  which results in 51% or more
of the Company's  common stock being changed into, or exchanged  for,  different
securities of the Company,  as applicable,  or other  securities or interests in
other persons or entities,  and (ii) the Employee on the  effective  date of any
change in the duties,  functions,  responsibilities or authority of the Employee
or any decrease in the base salary of the Employee in effect at that time.

         3. Position and Duties.

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

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

                  (i) fulfilling speaking engagements; and

                  (ii) engaging in charitable and community activities.

         4. Compensation and Related Matters.

         (a) Base Salary. The Company shall pay to the Employee a base salary at
the rate of not less than  $155,000.00  per  annum.  This base  salary  shall be
reviewed  at  least  annually  within  15  days of the  anniversary  date of the
Employee's  date of employment  and increases in such base salary may be granted
at the  sole  discretion  of the  Board  of  Directors  of  the  Company  or its
Compensation  Committee.  If from  time to time the  Board of  Directors  of the
Company or its Compensation  Committee increases the Employee's base salary, the
increased  base salary  amount  shall  become the minimum base salary under this
Agreement.

         (b) Stock Option. Upon the Company's  execution of this Agreement,  the
Company  shall grant to the Employee a ten-year  nonstatutory  stock option (the
"Stock  Option") to purchase  45,000 shares of the Company's  common stock at an
exercise  price equal to $9.22,  the fair market value of the  Company's  common
stock on January 13, 2005, the date the Company employed the Employee. The terms
and  conditions  of the  Stock  Option  shall be as set  forth  in that  certain
Nonstatutory  Stock Option Agreement,  dated of even date herewith,  between the
Company and the Employee.

         (c) Bonuses. In addition to base salary, the Employee shall be entitled
to receive on an annual basis during the  Employment  Term a cash bonus of up to
45% of the  Employee's  base salary,  the amount of which will be based upon and
subject to  parameters  established  by the Board of Directors of the Company or
its Compensation Committee. Any such bonuses shall be payable to the Employee in
the  manner  specified  by  the  Board  of  Directors  of  the  Company  or  its
Compensation Committee at the time any such bonus is awarded.

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

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

         (f) Moving  Expense  Reimbursement.  The Company  shall  reimburse  the
Employee for costs and expenses incurred by the Employee in having his furniture
and other  household  goods  packaged and moved from Houston,  Texas to Midland,
Texas; provided,  however, the amount the Company will reimburse to the Employee
for such costs and expenses shall not exceed $20,000.00 and must be supported by
appropriate  receipts  or other  supporting  documentation  satisfactory  to the
Company.

         (g)  Company  Vehicle.  The  Company  shall  purchase  a vehicle of the
Employee's choice for the Employee to use in connection with his employment with
the Company.  The purchase  price of this vehicle,  excluding all tax, title and
license fees, shall not exceed $32,500.00.

         (h) Mortgage  Payment  Reimbursement.  The Company will  reimburse  the
Employee for the regularly  scheduled  monthly mortgage  payment,  including the
monthly taxes and insurance  portion of such payment,  made by the Employee with
respect to his personal  residence  in Houston,  Texas during the months of May,
June and July 2005.  The Company shall not be required to reimburse the Employee
for any of the following:

                  (i) regularly  scheduled monthly mortgage payments made by the
         Employee on or after August 1, 2005; or

                  (ii)  prepayments of principal,  interest,  taxes or insurance
         made by the Employee.

         (i)  Vacations.  The  Employee  shall be  entitled to four (4) weeks of
vacation each calendar year, with pay, beginning with calendar year 2005.

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

         5. Termination of Employment.

         (a) The Employee's employment hereunder:

                  (i) shall  automatically  terminate upon the occurrence of any
         of the following: (A) the mental or physical incapacity or inability of
         the  Employee  to perform  his duties for a  consecutive  period of one

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         hundred  twenty (120) days or a  non-consecutive  period of one hundred
         eighty (180) days during any twelve month period;  (B) the death of the
         Employee;  or  (C)  the  voluntary  resignation  or  retirement  of the
         Employee; and

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

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

         (c) If the  Employee's  employment  is  terminated  as the  result of a
Fundamental  Change with  respect to the Company or with respect to the Employee
or for any reason other than as set forth in Sections  5(a)(i) or 5(a)(ii),  the
Employee  shall,  subject to the  provisions  of Section  5(d),  be  entitled to
receive from the Company a severance benefit consisting of the following:  (i) a
single lump sum cash payment equal to 200% of the  Employee's  base salary as in
effect at the date of the Employee's termination of employment,  which severance
benefit shall be paid no later than thirty (30) days  following  the  Employee's
termination  of employment;  (ii) all stock  options,  whether for common stock,
preferred stock,  warrants or any other securities of the Company,  owned or due
and owing to Employee,  shall  immediately  vest 100% to Employee on the date of
the  Employee's  termination  of  employment;  (iii)  subject  to the  terms and
conditions  of the plans and policies  governing  the  benefits  provided to the
Employee,  the health care and insurance benefits (e.g.,  health,  dental, life,
disability,  etc.) being  provided by the Company to the Employee at the date of
the Employee's  termination of employment  shall continue in place at no cost to
the Employee for a period of (18) months after such  termination  date; (iv) the
Employee  shall be  entitled  to receive any  individual  bonuses or  individual
incentive  compensation not yet paid but due and owing to the Employee under the
Company's  compensation  plan or plans  for the  years  prior to the year of the
Employee's  termination  of  employment,  which  amounts  shall  be  paid to the
Employee  in a single  lump sum cash  payment  no later  than  thirty  (30) days
following the date of the Employee's termination of employment; (v) the Employee
shall be entitled to receive any bonuses or  individual  incentive  compensation

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not yet paid but due and owing to the Employee under the Company's  compensation
plan or plans for the year of the Employee's  termination  of employment,  which
bonuses or  individual  incentive  compensation  shall be  calculated  as if the
Employee had  remained  employed by the Company for the entire year but shall be
prorated through the date of the Employee's termination of Employment, and shall
be paid in a single  lump sum cash  payment  to the  Employee  at the time  such
bonuses or  individual  incentive  compensation  are paid to similarly  situated
employees;  and (vi) subject to the terms and  conditions of the plans and other
documents governing the Employee's compensation and benefits, the Employee shall
be entitled to or shall immediately vest 100% in any and all other  compensation
plans,  bonus plans or incentive  plans,  including  any owned or due and owing,
that Employee  participated  in or  contributed to at the date of the Employee's
termination of Employment but that is not covered by (ii) through (v) preceding.

         (d) The severance benefit paid to the Employee pursuant to Section 5(c)
shall be in consideration  of the Employee's  continuing  obligations  hereunder
after  such  termination,   including,   without   limitation,   the  Employee's
obligations  under  Section 6.  Further,  as a condition  to the receipt of such
severance benefit, the Company, in its sole discretion, may require the Employee
to first execute a release,  in the form  established by the Company,  releasing
the Company and all Related Parties, and their officers,  directors,  employees,
and agents, from any and all claims and from any and all causes of action of any
kind or  character,  including,  but not  limited  to,  all claims and causes of
action arising out of the Employee's  employment  with the Company or any of the
Related Parties or the termination of the Employee's employment. The performance
of the Company's obligations under Section 5(c), including the Company's payment
of the severance  benefit,  shall  constitute full settlement of all such claims
and  causes  of  action.  The  Employee's  rights  under  Section  5(c)  are the
Employee's sole and exclusive rights against the Company and the Related Parties
and the  Company's  sole and  exclusive  liability  to the  Employee  under this
Agreement,  in  contract,  tort,  or  otherwise,  for  the  termination  of  the
Employee's  employment  with the  Company.  The  decision as to whether  "cause"
exists for  termination of the employment  relationship of the Employee with the
Company and whether and as of what date the Employee has become incapacitated in
the manner  described in Section 5(a)(i) are delegated to the Board of Directors
of the Company  for  determination.  If the  Employee  or the  Employee's  legal
representative,  as the case may be, desire to dispute any determination made by
the Board of Directors of the Company under this Section  5(d),  the Employee or
his  legal  representative,  as  the  case  may  be,  must  notify  (a  "Dispute
Notification")  the  Company  of such  desire  within  fifteen  (15) days of the
Employee's receipt of notification of such a determination by the Board.  Within
sixty (60) days of the Company's receipt of a Dispute Notification,  the parties
shall mediate the dispute in front of an independent mediator acceptable to both
the Employee and the Company and shall work in good faith to resolve the dispute
at such mediation.

         6.  Business   Opportunities   and  Intellectual   Property;   Personal
Investments; Covenant not to Compete; Confidentiality. The Employee acknowledges
that in the course of his employment by the Company and  performance of services
on behalf of the Company he will become privy to various business opportunities,
economic  and trade  secrets  and  relationships  of the Company and the Related
Parties.  Therefore,  in consideration of this Agreement and the consummation of
the Transaction, the Employee hereby agrees as provided below in this Section 6.

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

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

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

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

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

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

         (c)  Confidentiality  Obligations.  Employee  agrees  that  during  the
Employment Term and the Noncompetition Period,  Employee will not knowingly use,
publish,  disseminate  or otherwise  disclose,  directly or  indirectly,  to any
person  other  than the  Company or the  Related  Parties  and their  respective

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

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

                  (i) engage or participate in any manner,  whether  directly or
         indirectly  through  any  family  member or as an  employee,  employer,
         consultant,   agent,   principal,   partner,   more  than  one  percent
         shareholder,  officer,  director,  licensor,  lendor,  lessor or in any
         other individual or representative  capacity,  in any business activity
         that  relates  to  (A)  the  business  of  manufacturing,  fabricating,
         selling,  leasing and maintaining of natural gas  compressors,  (B) the
         design and  manufacture  of natural gas flare  systems,  components and
         ignition systems, (C) installing and servicing flare stacks and related
         ignition and control  devices or (D) in any other  business or activity
         related to the natural gas  compressor  industry that is in competition
         in any manner whatsoever with the business of any of the Company or the
         Related  Parties.  The covenant and  restrictions  in this Section 6(d)
         pertain to the  geographic  areas  comprised  of (x)  Midland and Ector
         Counties,  Texas,  and all  counties  adjacent  to  Midland  and  Ector
         Counties,  Texas,  and (y) Tulsa  County,  Oklahoma,  and all  counties
         adjacent  to  Tulsa  County,  Oklahoma  (all  of  such  counties  being
         collectively  referred to herein as, the "Noncompete Area");  provided,
         however, such covenant and restrictions shall not preclude the Employee
         from  engaging  or  participating  in  the  above  referenced  business
         activities  on behalf of any  company  that  conducts a majority of its
         business  operations outside of the Noncompete Area and whose principal
         offices are situated outside of the Noncompete Area, or from:

                           (A) making  investments  in securities of oil and gas
                  companies,  oil and gas  service  companies,  and  natural gas
                  compressor  companies which are registered on a national stock

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                  exchange,  if the  aggregate  amount owned by Employee and all
                  family members and  affiliates  does not exceed one percent of
                  such company's outstanding securities; or

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

                  (ii) actively  solicit,  directly or indirectly,  any employee
         (or person who within the  preceding  ninety (90) days was an employee)
         of the Company or any of the Related Parties or any other person who is
         under  contract  with or  employed by the Company or any of the Related
         Parties,  to  terminate  his  or  her  employment  by,  or  contractual
         relationship with, such person or to refrain from extending or renewing
         the same  (upon the same or new terms) or to become  employed  by or to
         enter  into  contractual  relations  with any  Persons  other than such
         person or to enter into a relationship with a competitor of the Company
         or any of the Related Parties.

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

         (f) The  invalidity  or  non-enforceability  of this  Section  6 in any
respect shall not affect the validity or enforceability of this Section 6 in any
other respect or of any other provision of this  Agreement.  If any provision of
this  Section 6 shall be held invalid or  unenforceable  by a court of competent
jurisdiction  by reason of the  geographic  or  business  scope or the  duration
thereof,  such invalidity or unenforceability  shall attach only to the scope or
duration  of  such   provision  and  shall  not  affect  or  render  invalid  or
unenforceable any other provision of this Agreement,  and, to the fullest extent
permitted by law,  this  Agreement  shall be construed as if the  geographic  or
business scope or the duration of such provision had been more narrowly  drafted
so as not to be invalid or unenforceable.

         (g)  Employee  acknowledges  that the  Company's  remedy at law for any
breach  of the  provisions  of this  Section 6 is and will be  insufficient  and
inadequate and that the Company shall be entitled to equitable relief, including
by way of temporary  and permanent  injunction,  in addition to any remedies the
Company may have at law.

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

         (i) The  representations  and covenants  contained in this Section 6 on
the part of the Employee  will be construed as ancillary to and  independent  of
any other  provision of this  Agreement.  The provisions of this Section 6 shall
continue  to be binding  upon the  Employee  in  accordance  with  their  terms,

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notwithstanding the termination of the Employee's  employment  hereunder for any
reason or the Company's breach of any of its obligations under this Agreement.

         (j) The parties to this Agreement agree that the limitations  contained
in this Section 6 with respect to time,  geographical area and scope of activity
are  reasonable.   However,   if  any  court  shall  determine  that  the  time,
geographical  area or scope of activity  of any  restriction  contained  in this
Section  6 is  unenforceable,  it is the  intention  of the  parties  that  such
restrictive  covenant set forth herein shall not thereby be terminated but shall
be deemed amended to the extent required to render it valid and enforceable.

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

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

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

                  (a) If to Employee:

                            Stephen C. Taylor
                            1200 Shirley Lane
                            Midland, Texas 79705

                  (b) If to the Company:

                            Natural Gas Services Group, Inc.
                            2911 S. County Road 1260
                            Midland, Texas 79706
                            Attn: Wallace C. Sparkman

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

         10.   Complete   Agreement.   This   Agreement   contains   the  entire
understanding  of the parties  with  respect to the  employment  of Employee and
supersedes all prior arrangements or understandings with respect thereto and all

                                       9
<PAGE>

oral or written employment  agreements or arrangements  between the Company (and
any of its  subsidiaries)  and  Employee.  This  Agreement may not be altered or
amended  except by a  writing,  duly  executed  by the party  against  whom such
alteration or amendment is sought to be enforced.

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

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

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

                                           COMPANY:

                                           NATURAL GAS SERVICES GROUP, INC.

                                           By: /s/ Wallace C. Sparkman
                                              ----------------------------------
                                              Wallace C. Sparkman
                                              Chairman of the Board of Directors

                                           EMPLOYEE:

                                                   /s/ Stephen C. Taylor
                                           -------------------------------------
                                                     Stephen C. Taylor

ACCEPTED AND APPROVED THIS
24TH DAY OF AUGUST, 2005.

By:      /s/ William F. Hughes, Jr.
   ----------------------------------------
         William F. Hughes, Jr.
         Chairman of Compensation Committee

                                       10Exhibit 10.2

THIS OPTION GRANTED HEREBY IS NONTRANSFERABLE  OTHER THAN BY WILL OR THE LAWS OF
DESCENT  AND  DISTRIBUTION  AND THE  SHARES  UNDERLYING  SUCH  OPTION MAY NOT BE
OFFERED FOR SALE, SOLD OR OTHERWISE  TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION  STATEMENT  UNDER  THE  SECURITIES  ACT OF 1933 OR  PURSUANT  TO AN
EXEMPTION FROM  REGISTRATION  UNDER SUCH ACT, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF NATURAL GAS SERVICES GROUP, INC.

                       NONSTATUTORY STOCK OPTION AGREEMENT

         THIS  NONSTATUTORY  STOCK OPTION  AGREEMENT  (this  "Agreement"),  made
effective as of the 24th day of August,  2005,  is between  Natural Gas Services
Group, Inc., a Colorado  corporation (the "Company"),  and Stephen C. Taylor, an
employee of the Company ("Employee").

         As an inducement  material to entering into employment with the Company
and in  consideration  of the  mutual  agreements  and other  matters  set forth
herein, the Company and Employee hereby agree as follows:

         1. Grant of Option. The Company hereby irrevocably grants to Employee a
nonstatutory  stock  option  (this  "Option")  to purchase all or any part of an
aggregate of 45,000 shares of the common stock of the Company (the "Stock"),  on
the terms and conditions set forth herein.  This Option is a nonstatutory  stock
option and not an incentive  stock  option  within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").

         2. Purchase Price.  The purchase price of Stock  purchased  pursuant to
the exercise of this Option shall be $9.22 per share,  which has been determined
to be the Fair  Market  Value of the Stock at  January  13,  2005,  the date the
Company employed the Employee.  "Fair Market Value" of the Stock for purposes of
this  Agreement  shall mean the  closing  price of the Stock as  reported by the
American Stock Exchange on the date the Fair MarketValue is to be determined.

         3. Exercise of Option. Subject to the earlier expiration of this Option
as herein  provided,  this  Option may be  exercised  by  written  notice to the
Company at its  principal  executive  office  addressed to the  attention of the
Chairman of the Board of  Directors  of the Company at any time and from time to
time  after  the  expiration  of six  months  and one day from the date of grant
hereof,  but,  except as  otherwise  provided  below,  this Option  shall not be
exercisable  for more  than the  percentage  of the  aggregate  number of shares
offered by this  Option  determined  by the number of partial or full years from
January 13, 2005,  the date the Company  employed the  Employee,  to the date of
such  exercise  during  which  the  Employee  is  employed  by the  Company,  in
accordance with the following schedule:

                                      -1-
<PAGE>

----------------------------------------- --------------------------------------
Date of Exercise                          Percentage of Shares That May
                                          be Purchased
----------------------------------------- --------------------------------------
Less than 1 year                          0%
----------------------------------------- --------------------------------------
1 year                                    33.333%
----------------------------------------- --------------------------------------
2 years                                   33.333%
----------------------------------------- --------------------------------------
3 years                                   33.334%
----------------------------------------- --------------------------------------

This  Option  shall  not be  exercisable  in  any  event  after  the  date  (the
"Expiration Date") that is ten years from the date of grant hereof. The purchase
price of shares as to which this  Option is  exercised  shall be paid in full at
the time of exercise  (a) in cash  (including  check,  bank draft or money order
payable to the order of the Company), or (b) by delivering to the Company shares
of Stock  having a fair  market  value  equal to the  purchase  price,  or (c) a
combination  of (a) and (b).  No fraction of a share of Stock shall be issued by
the Company  upon  exercise of this Option or accepted by the Company in payment
of the exercise price thereof; rather, Employee shall provide a cash payment for
such amount as is necessary to effect the issuance and  acceptance of only whole
shares of Stock.  This Option shall be exercised only for 100 shares of Stock or
a  multiple  thereof  or for the full  number  of  shares of Stock for which the
Option is then  exercisable.  Unless  and until a  certificate  or  certificates
representing  such shares  shall have been  issued by the  Company to  Employee,
Employee  (or the  person  permitted  to  exercise  this  Option in the event of
Employee's  death)  shall not be or have any of the  rights or  privileges  of a
shareholder of the Company with respect to shares acquirable upon an exercise of
this Option.

         4.  Incapacitation of the Employee.  If the Employee's  employment with
the Company is  terminated  as a result of the mental or physical  incapacity or
inability of the employee to perform his duties, this Option shall automatically
fully  vest on the date of such  termination  and  shall,  Subject  to Section 3
hereof,  be  exercisable  by the  Employee,  or personal  representative  of the
Employee  until the earlier of the date that is three  months  after the date of
such  termination  or the  Expiration  Date.  If the  Employee,  or the personal
representative  of the  Employee,  fails to exercise this Option within the time
period  specified in the  preceding  sentence,  the Option  shall  automatically
terminate.

         5.  Retirement  of  Employee.  If the  Employee's  employment  with the
Company  terminates by reason of  retirement of the Employee,  this Option shall
automatically  fully vest on the date of such termination and shall,  subject to
Section 3 hereof,  be  exercisable by the Employee until the earlier of the date
that is three months after the date of such  termination or the Expiration Date.
If the Employee  fails to exercise this Option within the time period  specified
in the preceding sentence, the Option shall automatically terminate.

         6. Death of the Employee.  If the Employee  dies during the  Employee's
employment  by  the  Company  or  within  three  months  after  the   Employee's
termination of employment as a result of incapacitation (as described in Section
4 above) or  retirement  (as  described  in Section 5 above),  this Option shall

                                      -2-
<PAGE>

fully vest on the date of the Employee's death, unless already fully vested, and
shall,  Subject  to Section 3 hereof,  be  exercisable  in full by the  personal
representative  or administrator  of the Employee's  estate or by any person who
acquired the right to exercise this Option by bequest or  inheritance,  but only
within the period  beginning  on the date of his death and ending on the earlier
of the one year anniversary of such date or the Expiration Date.

         7. Termination of Employment.If  Employee's employment with the Company
terminates  for any reason  other than those  described  in  Sections  4, 5 or 6
above,   unless   Employee  is   terminated   for  "cause,"  this  Option  shall
automatically  fully  vest  on  the  date  of  such  termination  and  shall  be
exercisable  in full by the Employee until the earlier of the date that is three
months after the date of such  termination or the Expiration  Date. For purposes
of this Agreement, for "cause" shall mean by reason of any of the following: (a)
the Employee's  conviction  of, or plea of nolo  contendere to, any felony or to
any crime or  offense  causing  substantial  harm to the  Company  or any of its
subsidiaries or affiliates  (whether or not for personal gain) or involving acts
of  theft,  fraud,  embezzlement,   moral  turpitude  or  similar  conduct;  (b)
malfeasance in the conduct of the Employee's duties,  including, but not limited
to, (i) willful and  intentional  misuse or diversion of any of the Company's or
it subsidiaries' or affiliates' funds, (ii) embezzlement, or (iii) fraudulent or
willful and material  misrepresentations  or concealments on any written reports
submitted to the Company or any of its subsidiaries or affiliates,  (c) material
failure to perform the duties of the Employee's  employment or material  failure
to follow or comply with the  reasonable  and lawful  written  directives of the
Board of Directors of the Company,  provided,  however,  that the Employee shall
have been informed,  in writing,  of such material failure and given a period of
not more than 60 days to remedy same;  or (d) a material  breach by the Employee
of the  provisions  of the  written  employment  agreement  then  governing  the
Employee's  employment.  If  the  Employee's  employment  with  the  Company  is
terminated  for cause,  this Option shall be  exercisable  by Employee until the
earlier of the date that is three months after the date of such  termination  or
the  Expiration  Date,  and then only as to the  number of shares of Stock  that
Employee was entitled to purchase hereunder at the time of such termination.

         8.  Fundamental  Change.  Upon the occurrence of a Fundamental  Change,
this Option shall automatically fully vest on the date that is immediately prior
to the  effective  date of such change.  For  purposes  hereof,  a  "Fundamental
Change" shall occur:  (a) with respect to the Company on the  effective  date of
any dissolution, merger, consolidation,  sale of all or substantially all of the
Company's  assets,  recapitalization  or any  other  type of  transaction  which
results in 51% or more of the  Company's  common stock being  changed  into,  or
exchanged for,  different  securities of the Company,  as  applicable,  or other
securities  or interests in other  persons or entities,  and (b) with respect to
the Employee on the effective date of any material  change in rank,  position or
responsibilities  of the  Employee or decrease in the base  compensation  of the
Employee.

         9.  Withholding  of Tax. To the extent that the exercise of this Option
or the  disposition  of shares of Stock  acquired  by  exercise  of this  Option
results in  compensation  income to  Employee  for  federal or state  income tax
purposes,  Employee shall deliver to the Company at the time of such exercise or
disposition  such  amount of money or shares of Stock as the Company may require

                                      -3-
<PAGE>

to meet its  obligations  under  applicable  tax laws or  regulations,  and,  if
Employee  fails to do so, the Company is authorized to withhold from any cash or
Stock remuneration then or thereafter payable to Employee any tax required to be
withheld by reason of such resulting  compensation  income.  Upon an exercise of
this Option,  the Company is further authorized in its discretion to satisfy any
such withholding requirement out of any cash or shares of Stock distributable to
Employee upon such exercise.

         10. Tax Gross-Up  Payment.  If the  exercise of this Option  results in
compensation  to  Employee  taxed  at  the  federal  ordinary  income  tax  rate
(including any applicable FICA or other  income-based  taxes) then applicable to
Employee,  the Company shall pay a tax gross-up payment to Employee in an amount
sufficient to place the Employee in the same after-tax  position  Employee would
have been in had such  compensation  been taxed at the federal capital gains tax
rate then  applicable  to Employee.  All  determinations  required to be made in
connection  with the  calculation  and  payment of the tax  gross-up  payment to
Employee  shall be made by the  accounting  firm  that  prepared  the  Company's
corporate  tax  return  for the year  preceding  the year in which the  Employee
exercises this Option. Any determinations  made by such accounting firm shall be
binding on the  Employee  and the Company;  provided,  however,  if the Employee
disagrees  with the  determinations  made by the  accounting  firm, the Employee
shall have the right to verify  and appeal  such  determinations  by  delivering
written notice thereof to the Board of Directors of the Company.  Upon the Board
of Director's receipt of such notice, the Board shall make the final decision as
to the calculation and payment of the gross-up payment,  which decision shall be
binding on the  Employee and the  Company.  If the Board of  Directors  does not
receive the  Employee's  written  notice of appeal on or before the date that is
ten (10) days after the Company's delivery to the Employee of the determinations
made by the  accounting  firm, the Employee shall be deemed to have accepted and
agreed to the determinations made by the accounting firm.

         11.  Status  of  Stock.  Employee  understands  that at the time of the
execution of this  Agreement  the shares of Stock to be issued upon  exercise of
this  Option  have not been  registered  under the  Securities  Act of 1933,  as
amended (the "Act"),  or any state  securities laws. The Company may, but is not
obligated  to,  effect such a  registration  in the future.  Until the shares of
Stock  acquirable upon the exercise of this Option have been registered for sale
under the Act, the Company  will not issue such shares  unless the holder of the
Option provides the Company with a written  opinion of legal counsel,  who shall
be  satisfactory  to the Company,  addressed to the Company and  satisfactory in
form and  substance to the  Company's  counsel,  to the effect that the proposed
issuance of such shares to such Option  holder may be made without  registration
under the Act. If an exemption from registration under the Act is available upon
an exercise of this Option,  Employee (or the person  permitted to exercise this
Option in the event of Employee's  death), if requested by the Company to do so,
will execute and deliver to the Company in writing an agreement  containing such
provisions  as the  Company  may require to assure  compliance  with  applicable
securities laws.

                                      -4-
<PAGE>

         Employee  agrees that the shares of Stock which Employee may acquire by
exercising  this Option  shall not be sold,  transferred,  assigned,  pledged or
hypothecated  in the  absence of an  effective  registration  statement  for the
shares  under the Act and  applicable  state  securities  laws or an  applicable
exemption from the registration requirements of the Act and any applicable state
securities  laws.  Employee also agrees that the shares of Stock which  Employee
may acquire by exercising this Option will not be sold or otherwise  disposed of
in any manner which would  constitute a violation of any  applicable  securities
laws,  whether  federal  or state.  In  addition,  Employee  agrees (i) that the
certificates  representing  the shares of Stock  purchased under this Option may
bear such  legend or legends  as the Board of  Directors  of the  Company or its
Compensation  Committee  deems  appropriate in order to assure  compliance  with
applicable  securities  laws,  (ii) that the Company may refuse to register  the
transfer  of the  shares  of Stock  purchased  under  this  Option  on the stock
transfer  records of the Company if such proposed  transfer would in the opinion
of counsel  satisfactory to the Company constitute a violation of any applicable
securities law and (iii) that the Company may give related  instructions  to its
transfer  agent,  if any, to stop  registration of the transfer of the shares of
Stock purchased under this Option.

         12. Nontransferability of Option. This Option may not be transferred by
Employee otherwise than by will or the laws of descent and distribution.  During
Employee's lifetime, this Option will be exercisable only by Employee.

         13.  Authority.  This Option is granted by the Company  pursuant to the
Company's general corporate powers under Sections 7-103-102 and 7-106-205 of the
Colorado Revised Statutes.

         14. Binding  Effect.  This Agreement shall be binding upon and inure to
the benefit of any successors to the Company and all persons  lawfully  claiming
under Employee.

         15.  Governing Law. This Agreement  shall be governed by, and construed
in accordance with, the laws of the State of Texas.

         IN WITNESS  WHEREOF,  the Company has caused this  Agreement to be duly
executed by its officer  thereunto  duly  authorized,  and Employee has executed
this Agreement, all as of the day and year first above written.

Dated:  August 24, 2005.

                                   NATURAL GAS SERVICES GROUP, INC.

                                   By: /s/ Wallace C. Sparkman
                                      ------------------------------------------
                                      Wallace C. Sparkman, Chairman of the Board

                                      -5-
<PAGE>

AGREED TO:
THIS 24TH DAY OF AUGUST, 2005.

        /s/ Stephen C. Taylor
--------------------------------------------
Stephen C. Taylor

Address:

1200 Shirley Lane
Midland, Texas 79705

ACCEPTED AND APPROVED THIS
24TH DAY OF AUGUST, 2005.

By:      /s/ William F. Hughes, Jr.
   -----------------------------------------
         William F. Hughes, Jr.
         Chairman of Compensation Committee

                                      -6-

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