Exhibit 99(ii)
CONSULTING AGREEMENT
This AGREEMENT (the "Agreement"), dated as of October 7, 1998, by and among Key
Energy Group, Inc., a Maryland corporation ("Parent"), and Michael E. Little
("Consultant").
WHEREAS, Consultant previously held the positions of Chairman, President and
Chief Executive Officer of Dawson Production Services, Inc., a Texas corporation
(the "Company");
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of August 11,
1998, by and among Parent, Midland Acquisition Corp., a New Jersey corporation
(the "Purchaser"), and the Company (the "Merger Agreement"), at the Effective
Time (as defined in the Merger Agreement) the Purchaser will be merged with and
into the Company (the "Merger"), and the Company will become a subsidiary of
Parent;
WHEREAS, upon the Effective Time of the Merger, Consultant will cease to be a
director and officer of the Company;
WHEREAS, Consultant entering into this Agreement (including the covenant not to
compete set forth in Section 5.3 hereof) is a material inducement to Parent and
the Purchaser to enter into the Merger Agreement; and
WHEREAS, Parent desires to secure the benefit of Consultant's knowledge,
experience and services by retaining Consultant, and Consultant desires to
provide services to Parent and its subsidiaries and affiliates, on the terms and
conditions set forth below;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
representations, agreements, and promises set forth herein, and intending to be
legally bound, the parties agree as follows:
1. Consulting Services. During the Term (as defined below), Consultant shall
make himself available to perform consulting services with respect to the
businesses conducted by Parent and its subsidiaries and affiliates, as such
consulting services may be requested from time to time by an officer of
Parent. Such request for Consultant's services shall provide reasonable
notice to Consultant. Consultant shall accommodate reasonable requests for
Consultant's consulting services, giving due consideration to Consultant's
other time committments, and shall devote reasonable time and his
reasonable best efforts, skill and attention to the performance of such
consulting services, including travel reasonably required in the
performance of such consulting services. Such consulting services are
estimated to require approximately forty (40) hours of Consultant's time
per month.
2. Term. The term of Consultant's engagement under this Agreement shall be
that period of time (the "Term") beginning on the date hereof and ending on
the earlier to occur of (i) October 6, 2001, or (ii) the date on which this
Agreement is earlier terminated pursuant to Section 4. There shall be no
extension of this Agreement other than by written instrument duly executed
and delivered by the parties hereto.
3. Consulting Fees and Expenses. During the Term, Parent shall pay, or cause
to be paid to, Consultant an annual fee of $200,000, payable in equal
bi-weekly installments (subject to proration for any partial period) on the
last day of each bi-weekly period during the Term to an account designated
in writing by Consultant (such payments, together with the payments
required under Section 5.4 hereof being referred to collectively herein as
the "Fees"). The payor may make any tax withholding it deems to be
necessary under applicable tax laws. In addition, Consultant shall be
reimbursed for reasonable, documented, out-of-pocket expenses incurred in
connection with consulting services rendered pursuant to this Agreement;
provided that such expenses are submitted for reimbursement within thirty
(30) days of the date such expenses are incurred.
4. Termination. Notwithstanding any provision of this Agreement to the
contrary, prior to the expiration of the Term:
(a) This Agreement may be terminated by Parent for the following reasons: (i) in
the reasonable judgment of the Chief Executive Officer of Parent, the willful
engaging by Consultant in conduct which is materially injurious to Parent or its
subsidiaries or affiliates; (ii) Consultant's conviction of, guilty plea
concerning, no contest plea concerning or confession of fraud, theft,
embezzlement or similar malfeasance or any crime of moral turpitude; (iii) in
the reasonable judgment of the Chief Executive Officer of Parent, the material
breach by Consultant of this Agreement; or (iv) in the reasonable judgment of
the Chief Executive Officer of Parent, an act of gross neglect or gross
misconduct by Consultant; provided, however, that in the case of any act or
failure to act described in clauses (i), (iii) and (iv), such act or failure to
act shall not constitute grounds for termination if, within ten (10) days after
Notice of Termination (as defined below) is given to Consultant, Consultant has,
to the reasonable satisfaction of the Chief Executive Officer of Parent,
corrected such act or failure to act or the Chief Executive Officer of Parent is
otherwise satisfied that termination is not in the best interests of Parent. In
the event that Consultant disputes Parent's action in terminating this Agreement
pursuant to this Section 4(a) and commences arbitration pursuant to Section 7 of
this Agreement, Parent shall continue to make, on a timely basis, all payments
due to Consultant hereunder, until a final arbitration decision and/or award is
made; provided, however, that if Parent is the prevailing party in such an
arbitration, Consultant shall immediately repay to Parent any and all payments
made to Consultant pursuant to this sentence, together with interest computed at
an annual rate equal to the prime rate plus one percent (1%).
(b) This Agreement may be terminated by Consultant in the event of a material
breach of this Agreement by Parent, which breach shall not be cured by Parent
within ten (10) days after Notice of Termination is given by Consultant.
(c) This Agreement (i) may be terminated by the mutual written agreement of the
parties hereto; (ii) shall be terminated without any additional action in the
event of Consultant's death or adjudicated incompetency; and (iii) may be
terminated by Parent in the event Consultant shall become disabled by illness,
injury or other incapacity as a result of which Consultant is unable to perform
services under this Agreement for a period or periods aggregating ninety (90)
days in any twelve (12) consecutive months.
(d) Any termination of this Agreement by Parent or by Consultant shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 10.4 of this Agreement. For purposes of this Agreement,
a "Notice of Termination" shall mean a written notice which shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of this Agreement.
e) Upon termination of this Agreement, other than by Consultant pursuant to
paragraph (b) of this Section 4, Consultant or Consultant's heirs, as the case
may be, shall be entitled to receive (i) any unpaid Fees accrued through the
date of termination and (ii) any unpaid expenses incurred prior to the date of
termination submitted for reimbursement in accordance with Section 3 hereof, and
Parent shall have no further obligation to Consultant or Consultant's heirs.
Upon termination of this Agreement by Consultant pursuant to paragraph (b) of
this Section 4, Consultant shall be entitled to receive (x) any unpaid Fees
accrued through the date of termination, (y) any unpaid expenses incurred prior
to the date of termination and submitted for reimbursement in accordance with
Section 3 hereof and (z) a lump sum payment equal to the unaccrued and unpaid
Fees Consultant would have otherwise received under the remainder of the full
three (3) year period described in clause (i) of Section 2, and Parent shall
have no further obligation to Consultant.
5. Restrictive Covenants.
5.1 No Solicitation. Consultant agrees that during the Term, he will not hire or
solicit to hire, directly or indirectly, any employee of Parent or its
subsidiaries or affiliates, or otherwise solicit, directly or indirectly, any
employee of Parent or its subsidiaries or affiliates to leave the employ of
Parent or its subsidiaries or affiliates.
5.2 Covenant Not to Compete. During the Term, Consultant shall not, in the
Continental United States, directly or indirectly engage in the following
businesses: (i) workover rig services, including completion of new wells,
maintenance and recompletion of existing wells (including horizontal
recompletions) and plugging and abandonment of wells at the end of their useful
lives; (ii) liquid services, including vacuum truck services, frac tank rental
and salt water injection; and/or (iii) production services, including well test
analysis, pipe testing, slickline wireline services and fishing and rental tool
services. Additionally, Consultant shall not own an interest in any company that
is not publicly traded and engages in the foregoing businesses except that,
notwithstanding any provision of this Section 5.3, he may own or invest in a
company that engages in, and he may himself engage in, the fishing and rental
tools services business provided that such business does not operate or conduct
business within the Restricted Territory (defined below). The term "Restricted
Territory" means that portion of the State of Texas that is south of Interstate
Highway 10 and west of Interstate Highway 37. Without limiting the generality of
the foregoing, Consultant shall not interfere with the business or accounts of
Parent and its subsidiaries and affiliates, including the making of any
statements or comments of a defamatory or disparaging nature to third parties
regarding Parent or its subsidiaries or affiliates or their respective officers,
directors, personnel, products or services.
5.4 Consideration. In exchange for Consultant's covenant not to compete
contained in Section 5.3 hereof, and in addition to the consulting fees to be
paid to Consultant pursuant to Section 3 hereof, Parent shall pay, or cause to
be paid to, Consultant an additional aggregate amount of $150,000, payable in
seventy-eight (78) equal bi-weekly installments (subject to proration for any
partial period) on the last day of each bi-weekly period of the Term to an
account designated in writing by Consultant. The payor may make any tax
withholding it deems to be necessary under applicable tax laws. Consultant
acknowledges that the consideration described in this Section 5.4 is adequate,
fair and reasonable.
5.5 Reasonableness of Restrictive Covenants; Irreparable Injury. Consultant
acknowledges that this Agreement is being entered into in connection with the
consummation of the transactions contemplated by the Merger Agreement, that the
services to be rendered by him to Parent and its subsidiaries and affiliates are
of a special and unique character, which gives this Agreement a peculiar value
to Parent, the loss of which may not be reasonably or adequately compensated for
by damages in an action at law, and that a material breach or threatened breach
by him of any of the provisions contained in this Section 5 will cause Parent
irreparable injury. Consultant therefore agrees that Parent shall be entitled,
in addition to any other right or remedy, to a temporary, preliminary and
permanent injunction, without the necessity of proving the inadequacy of
monetary damages or the posting of any bond or security, enjoining or
restraining Consultant from any such violation or threatened violations.
6. Return of Property. Consultant agrees that following the termination of his
engagement for any reason, he shall return all property of Parent and its
subsidiaries and affiliates that is then in or thereafter comes into his
possession, including, but not limited to, documents, contracts, agreements,
plans, photographs, books, notes, electronically stored data and all copies of
the foregoing as well as any other materials or equipment supplied by Parent and
its subsidiaries and affiliates to Consultant.
7. Arbitration. Any dispute between the parties arising out of this Agreement,
including but not limited to any dispute regarding any aspect of this Agreement,
its formation, validity, interpretation, effect, performance or breach
("arbitrable dispute") shall be submitted to arbitration in the city of San
Antonio, Texas, before an experienced arbitrator who is either licensed to
practice law in Texas, or is a retired judge. The parties agree to make a good
faith effort to select a mutually agreeable arbitrator. However, if the parties
are unable to reach agreement on an arbitrator, one will be selected pursuant to
the commercial rules of the American Arbitration Association or any successor
rules thereto. The arbitration shall be conducted in accordance with the
commercial rules of the American Arbitration Association or any successor rules.
The arbitrator in any arbitrable dispute shall not have authority to modify or
change this Agreement in any respect except to the extent set forth in Section
9.6 hereof. The prevailing party in any such arbitration shall be awarded its
costs, expenses, and reasonable attorneys' fees incurred in connection with the
arbitration, in an aggregate amount not to exceed $25,000. Consultant and Parent
shall each be responsible for payment of one-half of the amount of any
arbitrator's fee(s) payable prior to the existence of a prevailing party, such
amounts to be repaid to the prevailing party pursuant to the previous sentence.
The arbitrator's decision and/or award will be final and binding and fully
enforceable and subject to an entry of judgment by any court of competent
jurisdiction.
8. Consultant's Independence and Discretion.
(a) Nothing herein contained shall be construed to constitute the parties hereto
as partners or as joint venturers, or either as agent of the other, or as
employer and employee. By virtue of the relationship described herein
Consultant's relationship to Parent during the term of this Agreement shall only
be that of an independent contractor and Consultant shall perform all services
pursuant to this Agreement as an independent contractor. Consultant shall not
provide any services under the business name of Parent or its subsidiaries or
affiliates and shall not present himself as an employee of Parent or its
subsidiaries or affiliates.
(b) Subject only to such specific limitations as are contained in this
Agreement, the manner, means, details or methods by which Consultant performs
his obligations under this Agreement shall be solely within the discretion of
Consultant. Parent shall not have the authority to, nor shall it, supervise,
direct or control the manner, means, details or methods utilized by Consultant
to perform his obligations under this Agreement and nothing in this Agreement
shall be construed to grant Parent any such authority.
9. Miscellaneous.
9.1 Successors and Assigns; Binding Agreement. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and assigns, provided, however, that
the services to be provided by Consultant hereunder are personal to Consultant
and may not be delegated or assigned by him.
9.2 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to conflict of law
rules thereof.
9.3 Waivers. The waiver by either party hereto of any right hereunder of any
failure to perform or breach by the other party hereto shall not be deemed a
waiver or any other right hereunder or of any other failure or breach by the
other party hereto, whether of the same or a similar nature or otherwise. No
waiver shall be deemed to have occurred unless set forth in a writing executed
by or on behalf of the waiving party. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
9.4 Notices. All notices and communications that are required or permitted to be
given hereunder shall be in writing and shall be deemed to have been duly given
when delivered personally or sent by overnight carrier service (such as Federal
Express) to the parties at the following addresses:
If to Parent, to:
Key Energy Group, Inc.
Two Tower Center, 20th Floor
East Brunswick, New Jersey 08816
Attention: General Counsel
If to Consultant, to:
Michael E. Little
640 Elizabeth Street
San Antonio, TX 78209
or to such other address as may be specified in a written notice delivered
personally or sent by overnight courier given by one party to the other party
hereunder.
9.5 Severability. If for any reason any term or provision of this Agreement is
held to be invalid or unenforceable, all other valid terms and provisions hereof
shall remain in full force and effect, and all of the terms and provisions of
this Agreement shall be deemed to be severable in nature. If for any reason any
term or provision containing a restriction set forth herein is held to cover an
area or to be for a length of time which is unreasonable, or in any other way is
construed to be too broad or to any extent invalid, such term or provision shall
not be determined to be null, void and of no effect, but to the extent the same
is or would be valid or enforceable under applicable law, any court of competent
jurisdiction shall construe and interpret or reform this Agreement to provide
for a restriction having the maximum enforceable area, time period and other
provisions (not greater than those contained herein) as shall be valid and
enforceable under applicable law.
9.6 Amendment. This Agreement may not be amended or modified except by an
agreement in writing, signed by the parties hereto.
9.7 Entire Agreement. This Agreement, together with the Confidential Separation
9.7 Entire Agreement. This Agreement, together with the Confidential Separation
and Release Agreement dated as of the date hereof (including the Preexisting
Indemnification Provisions as defined therein) and the Certificate executed and
delivered by Consultant in connection with the payment of his stock options,
constitute the entire agreement between the parties hereto, and supersedes all
prior oral and/or written understandings and/or agreements between the parties
hereto.
9.8 Descriptive Headings. The parties hereto agree that the headings contained
herein are inserted for convenience only and shall not in any way affect the
meaning or construction of any provision of this Agreement.
9.9 Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original for all purposes but which, together, shall
constitute one and the same instrument.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
and year first above written.
KEY ENERGY GROUP, INC.
By:
Name:
Title:
MICHAEL E. LITTLE