EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (as from time to time amended in accordance with the
provisions hereof, this "Agreement"), is entered into this 5th day of December
1997 by and between Stephen E. McGregor, 3029 Woodland Drive, N.W., Washington,
D.C. (the "Executive"), and KEY ENERGY GROUP, INC., a Maryland corporation with
its principal offices at Two Tower Center, Tenth Floor, East Brunswick, New
Jersey 08816 (the "Company").
Recitals
A. The Company and the Executive have previously entered into that certain
Consulting Agreement dated as of July 15, 1997 (the "Consulting Agreement")
pursuant to which the Executive currently serves as an Executive Vice
President and the Chief Financial Officer of the Company.
B. The Company desires to terminate the Consulting Agreement and retain the
services of the Executive as an Executive Vice President and the Chief
Financial Officer of the Company pursuant to the terms and conditions
hereinafter set forth effective as of January 1, 1998 (the "Commencement
Date").
C. The Executive desires to terminate the Consulting Agreement and serve in
such capacities pursuant to the terms and conditions hereinafter set forth
effective as of the Commencement Date.
Agreement
NOW THEREFORE, in consideration of the covenants and agreements herein
contained, the Company and the Executive hereby agree as follows:
1. Termination of Consulting Agreement; Employment; Term.
(a) Effective as of the Commencement Date, the Consulting Agreement shall be
terminated and of no further force or effect except for the Company's
obligations to make any payments to the Executive under Section 2 thereof
for services rendered and expenses incurred prior to the Commencement Date.
The Company hereby agrees to employ the Executive, and the Executive hereby
accepts employment by the Company, as the Company's Executive Vice
President and Chief Financial Officer, such employment to commence as of
the Commencement Date, and to continue until the close of business on June
30, 2000, subject to extension as provided in this Section 1(a), unless
sooner terminated in accordance herewith (the "Initial Employment Period").
On each June 30, commencing with June 30, 2000, the term of the Executive's
employment hereunder shall be automatically extended for twelve (12) months
unless either he or the Company shall have given written notice to the
other that such automatic extension shall not occur, which notice shall
have been given no later than thirty (30) days prior to the relevant June
30th (the Initial Employment Period, together with any extensions, until
termination in accordance herewith, is referred to hereby as the
"Employment Period").
b) The Executive shall have the responsibilities, duties and authority
commensurate with his positions as the Executive Vice President and Chief
Financial Officer of the Company, including without limitation the general
supervision and control over, and responsibility for, the overall financial
and related activities and the international operations of the Company and
its Subsidiaries, subject, however, to the supervision of the Chief
Executive Officer and the Board insofar as such Board supervision is
required by applicable laws, regulations, and the Company. Such
responsibilities, duties and authority shall not be expanded or contracted
without the express consent of the Executive. The Executive will report
only to the Chief Executive Officer, and, as appropriate, the Board.
(c) The Executive will devote his full time and his best efforts to the
business and affairs of the Company; 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 substantial managerial efforts which materially 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.
(d) The principal location at which the Executive will substantially perform
his duties will be the Company's principal offices. In the event the
Company's principal offices are transferred, the Company will pay moving,
temporary living and other reasonable expenses in connection with the
Executive's relocation from his present primary residence to a location in
proximity to the Company's principal offices.
2. Salary; Bonuses; Expenses.
(a) During the Employment Period, the Company will pay base compensation to the
Executive at the annual rate of Two Hundred Forty Thousand Dollars
($240,000) 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
Executive's Base Salary on a yearly basis promptly following the end of
each fiscal year of the Company to determine if an increase is advisable,
and the Base Salary may be increased (but not decreased) at the discretion
of the Chief Executive Officer and the Board, taking into account, among
other factors, the Executive's performance and the performance of the
Company.
(b) The Executive shall be paid a cash bonus of $100,000 within 30 days of the
Company's annual earnings release for the fiscal year ended June 30, 1998
indicating an earnings per share level of at least $.85 per share (on a
fully diluted basis) for the 1998 fiscal year, and an additional cash bonus
of $150,000 within 30 days of the Company's annual earnings release for the
fiscal year ended June 30, 1998 indicating an earnings per share level of
at least $.95 per share (on a fully diluted basis) for the 1998 fiscal
year. Similar cash bonus arrangements of at least $250,000 for each of
fiscal years 1999 and 2000 shall be agreed to by the Executive and the
Chief Executive Officer and approved by the Board within the first 30 days
of each such fiscal year.
(c) In addition to the cash bonuses identified in Section 2(b), for each annual
period commencing July 1, 1997, the Executive shall be eligible to
participate in an incentive plan (the "Incentive Plan") for the Company's
executives providing for the payment of cash bonuses, which plan will
provide for the payment of bonuses based upon the achievement of goals set
forth in the Company's strategic plan as developed by the Executive, the
Chief Executive Officer, and the Board (the "Strategic Plan"), payable
within ninety (90) days after the end of each fiscal year. The performance
goals for the Incentive Plan will be based on objective criteria mutually
negotiated and agreed upon in good faith in advance by the Executive and
the Board. The Executive's aggregate annual bonus determined in accordance
with this Section 2(c) is referred to herein as the "Annual Bonus."
(d) The Executive shall be reimbursed by the Company for reasonable travel,
lodging, meal and other expenses incurred by him in connection with
performing his services hereunder in accordance with the Company's policies
from time to time in effect.
3. Stock Options.
(a) The Company has previously granted to the Executive pursuant to agreements
in the form attached hereto, as Exhibit A:
(i) Options (the "200 Options") to acquire two hundred thousand (200,000)
shares of the Company's common stock at an exercise price of $ 20.4375 per
share. One third (1/3) of the 200 Options shall vest on each of July 1,
1998, 1999 and 2000 and be exercisable at any time prior to July 1, 2008;
and
(ii) Options (the "50 Options") to acquire fifty thousand (50,000) shares of the
Company's common stock at an exercise price $20.4375 per share. The 50
Options shall vest, if at all, on the date during the three-year period
beginning on the date hereof on which the Closing Price (defined below) of
the Company's common stock is equal to or greater than $30.00 per share for
sixty (60) consecutive trading days and be exercisable for a period of ten
(10) years thereafter. The term "Closing Price" shall mean the closing
price as reported on the American Stock Exchange or such other national
exchange on which the Company's common stock is trading at the time of
determination.
(b) In addition to Section 3(a), for each annual period commencing July 1,
1997, the Executive shall be eligible to participate in a stock option plan
for the Company's executives providing for the granting of stock options
under the Company's 1995 Stock Option Plan, as amended from time to time
(the "1995 Stock Option Plan"). The performance goals for the grant of such
option will be based on objective criteria mutually negotiated and agreed
upon in good faith in advance by the Executive, the Chief Executive
Officer, and the Board. The Executive's aggregate annual bonus determined
in accordance with this Section 3(b) is referred to herein as the "Annual
Stock Option Grant."
(c) The Company agrees that it will use its best efforts to comply with the
requirements of Rule 16b-3 promulgated pursuant to the Securities Exchange
Act of 1934, as amended (the "1934 Act"), as such rule shall be in effect
from time to time, or with any successor provision to said rule ("Rule
16b-3") such that in the event the Executive shall become subject to
Section 16 (or a successor provision) of the 1934 Act with respect to
shares of the Company's capital stock, the Executive shall be afforded the
benefits of Rule 16b-3 with respect to such restricted stock or options,
including without limitation providing for the grant of restricted stock or
options pursuant to stock plans which comply with Rule 16b-3 and permit the
terms of options contemplated by this Agreement.
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, including without
limitation group medical and dental, life, executive life, accident and
disability insurance and retirement plans and supplemental and excess
retirement 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 B hereto.
(b) The Executive shall be entitled to no less than the number of vacation days
in each calendar year determined in accordance with the Company's vacation
policy as in effect from time to time, but not less than fifteen (15) days
in any calendar year (prorated in any calendar year during which he is
employed hereunder for less than the entire year in accordance with the
number of days in such calendar year in which he is so employed). The
Executive shall also be entitled to all paid holidays and personal days
given by the Company to its executives.
(c) The Executive shall be entitled to receive an allowance of $1,000 per
month, to cover costs incurred by the Executive in connection with the use
of his automobile during the Employment Period.
(d) The Company shall pay the reasonable expenses not in excess of $2,500 of a
home office for the Executive.
(e) 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.
(f) The Company shall pay all membership costs, including without limitation
all initiation and membership fees and expenses and all annual or other
periodic fees, dues and costs, for the Executive to become and remain a
member of one private country club, golf club, tennis club or similar club
or association for business use selected by the Executive and approved by
the Board, which approval shall not be unreasonably withheld or delayed.
5. Termination, Change of Control and Reassignment of Duties.
(a) Termination By Company. The Company shall have the right to terminate the
Executive's employment under this Agreement for Cause (as defined below) at
any time without obligation to make any further payments to the Executive
hereunder. The Company shall have the right to terminate the Executive's
employment for any reason other than for Cause only upon at least ninety
(90) days prior written notice to him, except as otherwise provided in
Section 5(b), which Section shall apply in the event the Executive becomes
unable to perform his obligations hereunder by reason of Disability (as
defined below). In the event the Company terminates the Executive's
employment hereunder for any reason other than for Cause or Disability,
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 following the
termination of employment, including without limitation the use of his
office and secretarial services during the remainder of his employment.
As used in this Agreement, the term "Cause" shall mean (i) the willful and
continued failure by the Executive to substantially perform his duties hereunder
(other than (A) any such willful or continued failure resulting from this
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 demand for substantial
performance is delivered by the Company to the Executive that specifically
identifies the manner in which the Company believes the Executive has not
substantially performed his duties); or (ii) the willful engaging by the
Executive in misconduct which is materially injurious to the Company, monetarily
or otherwise; or (iii) the conviction of a felony by a court of competent
jurisdiction. For purposes of this paragraph, no act, or failure to act on the
part of the Executive shall be considered "willful" unless done or omitted to be
done by him in bad faith and without reasonable belief that his action or
omission was in the best interest of the Company. 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
he has not done so; (B) an opportunity shall have been provided for the
Executive, together with his counsel, 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) he was guilty of conduct set forth in clause (i) or (ii) above, and
specifying the particulars thereof in detail.
(b) Termination upon Disability and Temporary Reassignment of Duties Due to
Disability.
(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 (A) for
a period of ninety (90) consecutive days, or (B) for an aggregate of ninety
(90) days during any period of twelve (12) consecutive months
("Disability"), then the term of the Executive's employment hereunder may
be terminated by the Company within sixty (60) days after the expiration of
said ninety (90) day period (whether consecutive or in the aggregate, as
the case may be), said 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
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, 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 a period of
ninety (90) consecutive days or an aggregate of ninety (90) days during any
period of twelve (12) consecutive months, 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.
(c) Termination by Executive. The Executive's employment may be terminated by
him by giving written notice, to the Company as follows: (i) at any time by
notice of at least thirty (30) days; (ii) at any time by notice for a Good
Reason, effective upon giving such notice; (iii) at any time, if his health
should become impaired, provided he has obtained a written statement from a
qualified doctor to such effect, effective upon giving such notice; or (iv)
at any time following but prior to the first anniversary of a Change of
Control (as defined below), effective upon giving such notice. 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, a "Good Reason" shall mean any of the following:
(A) Failure of the Board to elect the Executive as Executive Vice President and
Chief Financial Officer of the Company, or removal from the office of
Executive Vice President and Chief Financial Officer of the Company
provided that such failure or removal is not in connection with a
termination of the Executive's employment hereunder for Cause in accordance
with Section 5(a) and provided further that any notice of termination
hereunder shall be given by the Executive within ninety (90) days of such
failure or removal.
(B) Material change by the Company in the Executive's authority, functions,
duties or responsibilities as Executive Vice President and Chief Financial
Officer of the Company (including without limitation material changes in
the control or structure of the Company) which would cause his position
with the Company to become of less responsibility, importance, scope or
dignity than his position as of the Commencement Date, provided that (I)
such material change is not in connection with a termination of Executive's
employment hereunder for Cause in accordance with Section 5(a), (II) such
material change is not made in accordance with Section 5(a) following a
termination of Executive's employment by the Company other than for Cause
or Disability, (III) such material change is not made in accordance with
Section 5(b) pertaining to disability, including without limitation the
time period restrictions applicable thereunder, and (IV) any notice of
termination hereunder shall be given by him within ninety (90) days of when
he becomes aware of such change; or
(C) Failure by the Company to comply with any provision of Section 1, 2, 3, 4
or 8 of this Agreement, which has not been cured within fifteen (15) days
after notice of such noncompliance has been given by the Executive to the
Company, provided any notice of termination hereunder shall be given by the
Executive within ninety (90) days after the end of such fifteen (15) day
period;
(D) Failure by the Company to obtain an assumption of this Agreement by a
successor in accordance with Section 14 unless payment or provision for
payment and provision for continuation of benefits under this Agreement
have been made in a manner permitted by Section 5; and
(E) Any purported termination by the Company of the Executive's employment
which is not effected in accordance with the terms of this Agreement,
including without limitation pursuant to a notice of termination not
satisfying the requirements set forth herein (and for purposes of this
Agreement no such purported termination by the Company shall be effective),
which has not been cured within ten (10) days after notice of such
non-conformance has been given by the Executive to the Company, provided
any notice of termination hereunder shall be given by the Executive within
thirty (30) days of receipt of notice of such purported termination.
As used herein, a "Change of Control" means that any of the following events has
occurred:
(I) Any person (as defined in Section 3(a)(9) of the 1934 Act (or any successor
provision), other than the Company, is the beneficial owner directly or
indirectly of more than twenty-five percent (25%) of the outstanding Common
Stock of the Company, determined in accordance with Rule 13d-3 under the
1934 Act (or any successor provision), or otherwise becomes entitled to
vote more than twenty-five percent (25%) of the voting power entitled to be
cast at elections for directors ("Voting Power") of the Company, or in any
event such lower percentage as may at any time be provided for in any
similar provision for any director or officer of the Company or of any
Subsidiary approved by the Board;
(II) If the Company is subject to the reporting requirements of Section 13 or
15(d) (or any successor provision) of the 1934 Act, any person (as defined
in Section 3(a)(9) of the 1934 Act), other than the Company, shall purchase
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, provided that after consummation of the offer, the person in
question is the beneficial owner, directly or indirectly, of more than
twenty-five percent (25%) of the outstanding Common Stock of the Company,
determined in accordance with Rule 13d-3 under the 1934 Act (or any
successor provision) or such lower percentage as may at any time be
provided for in any similar provision for any director or officer of the
Company or of any Subsidiary approved by the Board;
(III)The stockholders or the Board shall have approved any consolidation or
merger of the Company in which (1) the Company is not the continuing or
surviving corporation unless such merger is with a Subsidiary at least
eighty percent (80%) of the Voting Power of which is held by the Company or
(2) 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 or such lower percentage as may at any time
be provided for in any similar provision for any director or officer of the
Company or of any Subsidiary approved by the Board.
(IV) 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; or
(V) 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 of 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.
(d) Severance Compensation.
(i) Termination for Good Reason or Other than for Cause. In the event the
Executive's employment hereunder is terminated (A) by the Executive for a
Good Reason or (B) the Company other than for Cause (including without
limitation in the event the Company elects at any time not to automatically
extend the Executive's employment hereunder pursuant to the second sentence
of Section 1(a) hereof), 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 the product of (I) two (2)
times (II) his Base Salary at the rate in effect on the termination date,
payable in twenty-four (24) substantially equal monthly installments
commencing at the end of the calendar month in which the termination date
occurs; provided, however, that if the Executive's employment is terminated
following a Change of Control or is terminated by the Company other than
for Cause in anticipation of a Change of Control, the severance
compensation referred to above shall be three (3) times the Base Salary at
the rate in effect on the termination date and shall be payable in one lump
sum on the date of such termination.
(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 the product of (A) two (2)
times (B) his Base Salary at the rate in effect on the termination date,
payable in twenty-four (24) substantially equal monthly installments
commencing at the end of the calendar month in which the termination date
occurs, reduced by the amount of any disability insurance proceeds actually
paid to the Executive or for his benefit during the said time period.
(e) Effect of Termination or Change of Control upon Equity Compensation.
(i) In the event the Executive's employment hereunder is terminated by the
Company for any reason other than for Cause (including without limitation
an election by the Company not to automatically extend the Executive's
employment hereunder pursuant to the second sentence of Section 1(a)
hereof), or in the event the Executive should terminate his employment for
Good Reason, then, unless the provisions of Section 5(e)(iv) hereof shall
apply, effective upon the date such termination is effective, any
restricted stock or unexpired options (including without limitation the 200
Options and the 50 Options) held by the Executive entitling the Executive
to purchase securities of the Company not previously vested shall be
forfeited, unless there shall be a contrary provision in the agreement or
plan pursuant to which such restricted stock or options were granted.
(ii) In the event the Executive's employment hereunder is terminated by the
Company for Cause, then effective upon the date such termination is
effective, any restricted stock or options (including without limitation
the 200 Options and 50 Options) not previously vested shall be forfeited,
unless there shall be a contrary provision in the agreement or plan
pursuant to which such restricted stock or options were granted.
(iii)In the event of the Executive's death while employed or in the event that
the Executive's employment should terminate as a result of Disability,
then, unless the provisions of Section 5(e)(iv) hereof shall apply, any
restricted stock or unexpired options (including without limitation the 200
Options and the 50 Options) held by the Executive entitling the Executive
to purchase securities of the Company not previously vested shall vest
and/or be exercisable for an exercise period of at least twelve (12) months
following such termination date, unless there shall be a contrary provision
in the agreement or plan pursuant to which such restricted stock or options
were granted.
(iv) In the event of a Change of Control while the Executive is employed, then
as of the date immediately prior to the date such Change of Control shall
occur, any restricted stock or options (including without limitation the
200 Options and 50 Options) held by the Executive entitling the Executive
to purchase securities of the Company, which restricted stock or options
are subject to vesting, shall, notwithstanding any contrary provision in
the agreement or plan pursuant to which such restricted stock or options
were granted, become fully vested and any such options shall become
exercisable as of such date and shall remain exercisable during the
respective terms of such options, unless his employment shall sooner
terminate. In the event of any termination of his employment following the
date an option becomes fully exercisable in accordance with the terms of
this Section 5(e)(iv), then the applicable exercise period shall be at
least twelve (12) months following the date of termination or such longer
period as set forth in the pertinent option agreement.
(f) Continuation of Benefits, etc. (i) Subject to Section 5(f)(ii) hereof, in
the event that Executive's employment hereunder is terminated by the
Executive for a Good Reason or by the Company other than for Cause
(including without limitation in the event the Company elects not to
automatically extend the Executive's employment hereunder pursuant to the
second sentence of Section 1(a) hereof), the Executive shall continue to be
entitled to the benefits that the Executive was receiving or to which the
Executive was entitled as of the date immediately preceding the applicable
termination date pursuant to Section 4 hereof at the Company's expense for
a period of time following the termination date ending on the first to
occur of (I) the second anniversary of the termination date or (II) the
date on which the Executive commences full-time employment by another
employer, but only if and to the extent the Executive is eligible to
receive through such other employer benefits which are at least equivalent
on an aggregate basis to those benefits the Executive was receiving or to
which the Executive was entitled under Section 4 hereof as of immediately
preceding the applicable termination date. If because of limitations
required by third parties or imposed by law, the Executive cannot be
provided such benefits through the Company's plans, then the Company will
provide the Executive with substantially equivalent benefits, on an
aggregate basis, at the Company's expense. For purposes of the
determination of any benefits which require a particular period of
employment by the Company and/or the attainment of a particular age while
employed by the Company in order to be payable, the Executive shall be
treated as having continued in the employment of the Company during such
period of time as the Executive is entitled to receive benefits under this
Section 5(f). 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, 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 is terminated following a Change of
Control or is terminated by the Company other than for Cause in
anticipation of a Change of 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 third
anniversary of the termination date, which amount shall be paid in one lump
sum on the date of such termination.
(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 such
portion of his Base Salary by virtue of his employment during the period
prior to termination and has not yet been paid, together with 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. Such amounts shall be paid within ten (10) days of
the termination date.
(h) Resignation. 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 (or with respect to
positions with a Subsidiary, the Executive and such Subsidiary) may
otherwise agree.
6. Limitation on Competition. During the Employment Period, and for such
period thereafter as the Executive is entitled to receive severance
compensation under this Agreement, in the event of termination of the
Executive's employment hereunder for any reason other than (a) following a
Change of Control, or (b) by the Executive for a Good Reason or (c) by the
Company other than for Cause (including without limitation in the event the
Company elects at any time not to automatically extend the Executive's
employment hereunder pursuant to the second sentence of Section 1(a)
hereof), (i) the Executive shall not, directly or indirectly, without prior
written consent of the Board, participate or engage in, whether as a
director, officer, employee, advisor, consultant, stockholder, partner,
joint venturer, owner or in any other capacity (other than as an outside
attorney or investment banker), any business engaged in the business of
furnishing oil field services or the drilling, production or sale of
natural gas or crude oil (a "Competing Enterprise"), 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; and (ii) the Executive shall not, directly or indirectly solicit,
raid, entice or otherwise induce any employee of the Company or any of its
Subsidiaries to be employed by a Competing Enterprise.
7. 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.
8. Legal Expenses. The Company shall also pay the Executive's reasonable fees
for legal and other related expenses associated with any disputes arising
hereunder or under the stock option agreements referred to herein if either
a court of competent jurisdiction shall render a final judgement 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.
9. 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 the address
referred to above, or at such other place as the Executive may from time to
time designate in writing, or by personal delivery, 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, and to counsel for the
Company as may be requested in writing by the Company. A notice will be
deemed given upon the mailing thereof or delivery to an overnight courier
for delivery the next business day, except for a notice of change of
address, which will not be effective until receipt, and except as otherwise
provided in Section 5(a).
10. 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.
11. 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.
12. 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.
13. Agreement Complete; Amendments. Effective as of the Commencement Date, this
Agreement, together with the stock option agreements referred to herein and
the 1995 Stock Option Plan, is 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.
14. 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 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
provision 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 15,
the Company shall not be required to take all actions necessary to insure
that a transferee or transferees of the Company's assets are bound by the
provisions of this Agreement and such transferee or transferees of the
Company's 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 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.
15. Governing Law. This Agreement will be governed and construed in accordance
with the law of Maryland applicable to agreements made and to be performed
entirely within such state, without giving effect to the conflicts of laws
principles thereof.
16. Survival. The provisions of Sections 3, 5(d), (e), (f), (g) and (h), 6, 7,
and 8 hereof, and any restricted stock or stock option agreement entered
into pursuant to Section 3 hereof or during the Executive's employment
hereunder shall survive the termination of the Executive's employment as
continuing and separate agreements between the parties.
17. Subsidiaries. As used herein, the term "Subsidiaries" shall mean all
corporations a majority of the capital stock of which entitling the holder
thereof to vote is owned by the Company or a Subsidiary.
18. Interpretation. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
KEY ENERGY GROUP, INC.
By:________________________________
Francis D. John
President and Chief Executive Officer
____________________________________
STEPHEN E. MCGREGOR
EXHIBIT B
Company Paid Coverages
1. Life Insurance 1,000,000 (with a physical exam), payable to beneficiary
designated by the Executive.
2. Long Term Disability Insurance Salary continuation benefit for total
disability. Benefit commences with ninetieth day of disability and
continues to a maximum of age sixty-five. Annual maximum benefit shall be
60% of the Base Salary.
4. Medical and Dental Plan Comprehensive medical and dental plans available to
the company's senior management
5. Director and Officer Liability Insurance