SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-KSB/A
(Amendment No. 1)
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For fiscal year ended June 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1943 [No Fee Required]
For the transition period from to
Commission file no. 1-8038
KEY ENERGY GROUP, INC.
(Name of small business issuer in its charter)
Maryland 04-2648081
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 Livingston Ave., New Brunswick, NJ 08901
(Address of principal executive offices and ZIP Code)
Issuer's telephone number: (908) 247-4822
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $.10 par value American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.10 par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The Registrant's revenues for the Year ended June 30, 1995 were $44,689,000.
The aggregate market value of the Common Shares held by nonaffiliates of the
Registrant as of August 1, 1995 was approximately $34,999,644.
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Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes X No ___
Common Shares outstanding at August 1, 1995: 6,913,510
DOCUMENTS INCORPORATED BY REFERENCE: None.
FORM 10-KSB/A
KEY ENERGY GROUP, INC. and Subsidiaries
INDEX
Part III.
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act.
Item 10. Executive Compensation.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Item 12. Certain Relationships and Related Transactions.
Item 13. Exhibits.
Signatures.
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Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Directors
The Directors of Key Energy Group, Inc. (the "Company") and certain
information concerning each Director are presented below:
FRANCIS D. JOHN (42), is the President, Chief Executive Officer, Chief
Financial Officer and a Director and co-chairman of the Board of the Company. He
has been the President and Chief Executive Officer of the Company since
September 1989, Chief Financial Officer since June 1988 and a Director since
June 1990. He is also Chairman of the Board and a Director of both Yale E. Key,
Inc. ("Key"), Odessa Exploration Incorporated ("OEI"), and Key Energy Drilling,
Inc. (d/b/a Clint Hurt Drilling), which are wholly owned subsidiaries of the
Company. Since July 1992, Mr. John has been a Director of Aerosonics Corp., a
company which produces components for aircraft.
VAN D. GREENFIELD (49), has been a Director of the Company since 1988 and since
March 1994 has been co-chairman of the Board. He has been the President of V.W.
Investors, Inc., the General Partner of Greenfield Partners, since April 1986,
and formerly served as the Managing Partner of Greenfield Partners, a firm
involved in investment banking. He is also a Director of Progressive Savings
Bank.
WILLIAM MANLEY (71), has been a director of the Company since December 1989.
From 1978 until his retirement in 1986, he was Executive Vice President of Cabot
Corporation, a diversified industrial conglomerate. Mr. Manly also serves as a
Director of Mineral Exploration and Resource Corporation, which is involved in
mineral exploration and related activities.
MORTON WOLKOWITZ (66), has been Director of the Company since December 1989. He
also serves as a Director of Key. From 1988 through 1991, Mr. Wolkowitz served
as the President and Chief Executive Officer of Wolkow Braker Roofing
Corporation, a company that provides a variety of roofing services. Since July
1992, he has served as a Director of Aerosonics Corp, a company which produces
components for aircraft.
D. KIRK EDWARDS (35), has been a Vice President and Director of the Company
since July 1993. He has been the President, Chief Executive Officer and Director
of OEI since July 1993. Mr. Edwards formerly was President of Odessa Exploration
Incorporated, a Texas corporation engaged in development, drilling and operation
of oil and gas wells and ownership and development of other mineral interests, a
position he had occupied since 1987.
Other Executive Officers
DANNY R. EVATT (36), has been the Chief Accounting Officer and Treasurer of
the Company since July 1990. He has been the Treasurer, Secretary and Chief
Financial Officer of Key since May 1984.
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C. RON LAIDLEY (49), has been the President and Chief Executive Officer of Key
since April 1995. He has been Vice President of Key from 1982 to April 1995.
Family Relationships
There are no family relationships among the persons listed above.
Committees of the Board.
In order to facilitate the various functions of the Board of Directors,
the Board has created an Audit Committee, a Compensation and Stock Grant Plan
Committee and an Executive Committee. There is no standing Nominating Committee
of the Board.
The Audit Committee was formed on December 14, 1989. The Audit
Committee meets with the Company's independent auditors at least twice annually
to review financial results, internal financial controls and procedures, audit
plans and recommendations. The Audit Committee also recommends the selection,
retention or termination of independent public accountants, approves services
provided by the independent public accountants prior to providing such services,
and evaluates the possible effect performance of such services will have on
their independence. Messrs. Greenfield and Wolkowitz serve on the Audit
Committee with Mr. Wolkowitz serving as Chairman. The Audit Committee held two
meetings during fiscal year 1995 concerning audits and financial statements in
conjunction with meetings of the entire Board of Directors.
The Compensation and Stock Grant Plan Committee was formed on December
14, 1989. The Compensation and Stock Grant Plan Committee recommends to the
Board the compensation of Executive Officers and Directors and recommends the
approval of stock grants of the Company. Messrs. Thompson, Manly and Wolkowitz
serve on the Compensation and Stock Grant Plan Committee with Mr. Wolkowitz
serving as Chairman. The Compensation and Stock Grant Plan Committee held six
meetings during fiscal year 1995 in conjunction with meetings of the entire
Board of Directors.
The Executive Committee was formed on October 11, 1993. The Executive
Committee may take such actions as the Board delegates to it, consistent with
Maryland General Corporation Law. Messrs. Greenfield, John and Wolkowitz serve
on the Executive Committee, with Mr. John serving as Chairman. The Executive
Committee held twelve meetings during fiscal year 1995, exclusive of the regular
meetings of the Board of Directors.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and Directors, and persons who own more than ten percent of
the Company's Common Stock, to file reports of ownership and changes in
ownership (Form 5) with the Securities and Exchange Commission and the American
Stock Exchange, Inc. Officers, Directors and greater than ten- percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
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Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the fiscal year ended June 30, 1995, all Section 16(a)
filing requirements applicable to its officers, Directors and greater than
ten-percent beneficial owners were complied with.
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Item 10. Executive Compensation.
EXECUTIVE COMPENSATION
The following table sets forth the compensation, including bonuses, paid by the
Company and its subsidiaries to the Chief Executive Officer and to each of the
four most highly compensated Executive Officers of the Company and its
subsidiaries for services rendered in all capacities to the Company and its
subsidiaries during the fiscal year ended June 30, 1995.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Principal Year Salary Bonus Other Annual Restricted Options/ LTIP All Other
Position ($) ($) Compensation Stock SARs Payouts Compensation
Award(s) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Francis D. John 1995 225,000 None None None None None None
CEO
C. Ron Laidley 1995 155,000 None None None None None None
Vice President of
Key
Danny R. Evatt 1995 95,000 None None None None None None
Chief Accounting
Officer
D. Kirk Edwards 1995 125,000 None None None None None None
President and CEO
of OEI
Max Emmert III 1995 129,000(1) None 47,000(1) None None None None
</TABLE>
(1) Mr. Emmert retired from his position as an Executive Officer of the
Company as of February 1, 1995. Amount in column (c) represents salary paid to
Mr. Emmert from July 1, 1994 to January 31, 1995.
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Stock Grant Plan.
On September 27, 1993, a Stock Grant Plan (the "Plan") was adopted by
the Board subject to approval from the Company's stockholders which was received
on July 25, 1994. The Plan authorized a Compensation and Stock Grant Plan
Committee of the Board (the "Committee") to recommend to the Board the award of
up to 600,000 shares of the Company's Common Stock to key employees between
October 15, 1993 and December 31, 2003. The shares of Common Stock reserved or
awarded under the Plan are set forth in the following chart. None of the shares
awarded have been issued and, upon and subject to approval of the 1995 Stock
Option Plan by the Company's shareholders, the Plan will be terminated and
grantees under the Plan will waive all rights to any shares theretofore awarded
to them.
See chart on following page.
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<TABLE>
<CAPTION>
STOCK GRANT PLAN
Name Position Aggregate Dollar Value Aggregate Number Dollar Value ($) of
Number ($) if Total of Shares Awarded Aggregate Number
of Shares Reserved Shares on October 1, 1993, of Shares Awarded
Reserved for Were Awarded as contingent upon on October 1, 1993,
Award For of October 5, Stockholder contingent upon
Fiscal Years 1994 (1) approval of the Stockholder
Ended June 30, Plan (2) approval of the
1994 through Plan, as of October 1,
June 30, 1996 1993 (2)
<S> <C> <C> <C> <C> <C>
Francis D. John President, Chief 120,000 $615,000 40,000 $182,520
Executive Officer
and Chief Financial
Officer of the
Company
Max Emmert III President and Chief 100,000 512,500 20,000 91,260
Executive Officer of
Key
C. Ron Laidley Vice President of 60,000 307,500 12,000 54,756
Key
D. Kirk Edwards President and Chief 80,000 410,000 0 0
Executive Officer of
OEI
Danny R. Evatt Chief Accounting 45,000 230,625 5,000 22,815
Officer of the
Company
Executive Group 405,000 2,075,625 77,000 351,351
Non-Executive 0 0 0 0
Director Group
Non-Executive 45,000 230,625 8,000 36,504
Officer Employee
</TABLE>
(1) Based on closing price of $5.125 per share of the Common Stock, without
restrictions on transfer, on the American Stock Exchange, Inc. on October 5,
1994. Note that the shares of Common Stock reserved for award under the Stock
Grant Plan will contain restrictions on transfer thereof which may reduce the
value of the shares.
(2) Based on the closing price of $4.563 per share of the Common Stock,
without restrictions on transfer, on the American Stock Exchange, Inc. on
October 1, 1993. The shares of Common Stock reserved for award under the Stock
Grant Plan will contain restrictions on transfer thereof which may reduce the
value of the shares. None of the shares awarded have been issued. See "1995
Stock Option Plan".
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1995 Stock Option Plan
On July 6, 1995, the Company's Compensation Committee adopted the 1995
Stock Option Plan (the "1995 Plan") and granted certain options under the 1995
Plan subject to Board and shareholder approval. The Board approved the 1995 Plan
and the option grants thereunder on October 5, 1995 and the Company intends to
submit the 1995 Plan to a vote of its shareholders at its 1995 Annual Meeting.
Upon and subject to approval of the 1995 Plan, the Plan together with all prior
awards thereunder will be cancelled and will be replaced in its entirety by the
1995 Plan. As noted above, no shares awarded under the Plan were issued by the
Company and none are currently outstanding.
The 1995 Plan provides for the grant of options designed to qualify as
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") and options not designed
to qualify for such special tax treatment ("NSOs"), to purchase up to an
aggregate of 1,150,000 shares of the Company's Common Stock. Unless sooner
terminated, the 1995 Plan will terminate on July 1, 2005 and no options may be
granted pursuant to the 1995 Plan after June 30, 2005. The 1995 Plan will be
administered by a Committee consisting of at least three (3) Directors of the
Company, each of whom is both a "disinterested person" within the meaning of
Rule 16b-3 of the Securities and Exchange Act of 1934, as amended, and an
"outside director" within the meaning of Section 162(b) of the Code. The
Committee currently consists of Messrs. Greenfield, Manley and Wolkowitz. A
complete description of the 1995 Plan will be included in the Company's Proxy
Statement for its 1995 Annual Meeting.
Subject to shareholder approval, the following options were granted,
effective July 6, 1995, to Executive Officers and other key employees of the
Company under the 1995 Plan:
Optionee Options Granted
Francis D. John 500,000
C. Ron Laidley 125,000
D. Kirk Edwards 100,000
Danny Evatt 50,000
Other key employees 175,000
All of the options listed above will be exercisable at $5.00 per share, the
closing price of the Company's Common Stock on July 6, 1995, the date of grant,
and with the exception of the options granted to Mr. John, will generally vest
in four installments, the first installment to take place on the date of the
grant, subject to acceleration of vesting upon the occurrence of certain events.
Of the options granted to Mr. John, options to purchase 350,000 shares vest
immediately upon the effective date of the grant and options to purchase 150,000
shares will vest on the first date (occurring on or after July 1, 1996 but prior
to July 1, 1999) on which the fair market value of the Company's Common Stock
equals at least $9.50 per share.
As noted above, subject to and upon shareholder approval of the 1995
Plan and the grants thereunder, the Plan and all prior awards thereunder will be
canceled.
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Outside Directors' Stock Option Plan
On July 6, 1995, the Compensation Committee adopted, subject to Board
and shareholder approval, a stock option plan for its outside directors (the
"Outside Directors' Plan") which provides for the grant of options to purchase a
total of 300,000 shares of Company's Common Stock to the Company's outside
directors. The Board approved the Outside Directors' Plan on October 5, 1995.
Under the Outside Directors' Plan, each outside director who was a member of the
Executive Committee on July 1, 1995 will automatically receive an option to
purchase 50,000 shares on July 6, 1995 and an option to purchase 25,000 shares
on July 1,1996; each outside director who was not a member of the Executive
Committee on July 1, 1995 will automatically receive an option to purchase
25,000 shares on July 6, 1995 and an option to purchase 25,000 shares on July 1,
1996; and each outside director who first becomes an outside director after July
1,1995 but prior to July 1,1996, will automatically receive an option to
purchase 50,000 shares on July 1, 1996. The exercise price of each option will
be the fair market value of the Company's Common Stock on the date of the grant.
The Company intends to submit the Outside Directors' Plan to a vote of its
shareholders at its 1995 Annual Meeting. A complete description of the Outside
Directors' Plan will be included in the Company's Proxy Statement for its 1995
Annual Meeting.
Yale E. Key Plan.
Key maintains a 401-(k) Plan which covers substantially all employees
of Key. Key made a contribution to the 401-(k) Plan in fiscal year 1995 in the
amount of $20,000.
Employment Agreements.
Until July 1, 1995, Mr. John was a party to an employment letter
agreement (the "Letter Agreement") with the Company which provided that Mr. John
would receive $225,000 in salary per year and would also be eligible to earn a
cash bonus, Common Stock grant or options based on his individual and the
Company's performance. In addition, if Mr. John were terminated, the Letter
Agreement provided that he would receive severance payments in the amount of up
to approximately $244,000 and benefits, comprised of life insurance, health
insurance and use of a Company car, for up to 13 months after the date of
termination.
Effective as of July 1, 1995, the Company entered into a new employment
agreement with Mr. John which provides that Mr. John will serve as President,
Chief Executive Officer and a Director of the Company for a three year term
commencing July 1, 1995 and continuing until June 30, 1998, and thereafter the
term will be automatically extended for successive one year terms unless
terminated no later than 30 days prior to the commencement of an extension term.
Under the agreement, Mr. John will receive base compensation of $325,000 per
year and will be eligible for annual incentive compensation of up to 30% of base
compensation contingent upon the Company's achievement of goals to be set forth
in a strategic plan to be developed by the Executive Committee. Base
compensation will be reviewed annually and may be increased (but not decreased)
by the Board in its discretion. Pursuant to the agreement, Mr. John also
received a bonus of $250,000 payable in four equal installments, commencing upon
execution and delivery of the agreement and thereafter on January 1 of each of
1996, 1997 and 1998, together with interest at 6%. The bonus was paid in
recognition of the Company's successful
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reorganization and performance post-reorganization, for which no bonus had
previously been paid to Mr. John, and the fact that the Company's financial
performance and results of operations in each fiscal year during the three year
period ended June 30, 1995 have substantially exceeded projections. The
agreement also provides for the grant of options to Mr. John described above
under "1995 Stock Option Plan". If during the term of the agreement Mr. John is
terminated by the Company for any reason other than for cause, or if he
terminates his employment for a good reason or following a change of control, he
will receive severance compensation equal to three times his base compensation
in effect at the time of termination, payable in 36 equal monthly installments,
provided, however, that if termination results from a change of control,
severance compensation will be payable in a lump sum on the date of termination.
Mr. John is also subject to restrictions on competition during the term of the
agreement and, with certain exceptions, the severance period.
The Company has also entered into employment agreements as of July 1,
1995 with Messrs. Laidley and Evatt. Mr. Laidley's agreement provides that he
will: serve as President of Key for a three year term commencing July 1, 1995
and thereafter for successive one year terms unless terminated 30 days prior to
the commencement of an extension term; receive base compensation of $192,000 per
year; participate in an incentive compensation plan providing for cash bonuses
up to 50% of base compensation; and receive the stock options under 1995 Plan.
Mr. Evatt's agreement provides that he will: serve as the Company's Chief
Accounting Officer and Treasurer for a term identical to the term in Mr.
Laidley's agreement; receive base compensation of $105,000 per year; participate
in an incentive compensation plan, providing for cash bonuses up to 30% of base
compensation; and receive the stock options under 1995 Plan.
In connection with the acquisition of OEI, as of July 20, 1993 the
Company entered into a three year employment agreement with Mr. Edwards. The
agreement provides for an annual salary of $125,000 and Mr. Edwards is eligible
to receive a bonus contingent upon the Company's attainment of certain earnings
criteria from certain wells.
Effective February 1, 1995, Max Emmert III retired as a Director and
Vice President of the Company and as President and Chief Executive Officer of
Key. During the three year period commencing February 1, 1995, Mr. Emmert will
receive $112,500 per year, reimbursement of reasonable automobile expenses and
health and life insurance and will serve as a consultant and Chairman of the
Board of Key. Mr. Emmert has also agreed that for a five year period commencing
February 1, 1995, he will not directly or indirectly compete with the Company or
its subsidiaries.
Other Compensation.
The Company has no other deferred compensation, pension or retirement
plans in which Executive Officers participate.
Compensation of Directors.
Compensation for the non-officer Directors for fiscal year 1995 was
$5,000 per quarter. Directors are reimbursed for travel and other expenses
directly associated with Company business. All fees for fiscal year 1995 were
paid in cash.
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Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table provides information as of October 25, 1995 with
respect to the shares of Common Stock of the Company deemed to be beneficially
owned by each person known by the Company to own more than 5% of the outstanding
Common Stock, by each Director of the Company, each Executive Officer of the
Company and all Directors and officers of the Company as a group. Except as
noted below, each holder has sole voting and investment power.
Number of Shares of
Common Stock Beneficially Percentage of Shares of
Owned Common Stock (a)(b)
Francis D. John (1) (2) 53,766 *
Van D. Greenfield (1) 19,884 *
William Manly (1) 326 *
Morton Wolkowitz (1) 258,959 3.75%
Max Emmert III (1) 45,354 *
D. Kirk Edwards (1) 150,000 2.17
Danny R. Evatt (1) 0 *
C. Ron Laidley (1) 45,000 *
Directors and Officers as 573,289 8.29
group
Morton Cohn (1) (3) 626,422 9.06
FMR Corp. (4) 149,900 2.17
WellTech, Inc. (5) 1,885,000 26.31
(a) Based on 6,913,510 shares of Common Stock outstanding at October 25,
1995.
(b) The calculation for WellTech, Inc. is based on 7,163,510 shares of
Common Stock, giving effect to the issuance of warrants to purchase 250,000
shares of Common Stock to WellTech, Inc.
* Less than 1%
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(1) Under the rules for determining beneficial ownership, each Director and
officer is deemed to own that number of shares of Common Stock which he
or she may purchase or acquire pursuant to a warrant, option or
convertible security within 60 days as if he or she had exercised the
warrant or option or had converted the convertible security. The
number of shares of Common Stock that each person is so deemed to own
goes into both the numerator and the denominator in calculating that
person's percentage ownership. No options under the Company's 1995 Plan
are included because the 1995 Plan has not yet been approved by the
shareholders; no shares granted under the Plan are included because no
shares were issued thereunder and the Plan will terminate upon
shareholder approval of the 1995 Plan.
(2) The number shown under the Common Stock column includes (i) 2,371
shares owned directly by Mr. John, (ii) 50,045 shares held by Mr. John
as custodian for his two children as to which Mr. John disclaims any
beneficial interest, and (iii) 1,350 shares held by Mr. John's wife, as
to which Mr. John disclaims any beneficial interest.
(3) The number shown under the Common Stock column includes (i) 167,364
shares owned directly by Mr. Cohn, and (ii) 459,058 shares owned
indirectly through his ownership of Green-Cohn Group, Inc.
(4) The number shown under the Common Stock column includes 149,900 shares
beneficially owned by FMR Corp., all of which are under the direct
control of Mr.
Edward C. Johnson III of FMR Corp.
(5) The number shown under the Common Stock column includes 1,635,000
shares and warrants to purchase an additional 250,000 shares owned by
WellTech, Inc.
Arrangements Which Might Result in a Change of Control.
For a description of the Company's proposed merger with WellTech, Inc.,
see Item 1. Business - The Company - Subsequent Event.
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Item 12. Certain Relationships and Related Transactions.
In connection with the acquisition of OEI, the Company issued 150,000
shares of the Common Stock to Mr. Edwards, the former owner and the now current
President of OEI, and OEI assumed approximately $1,811,000 in bank debt which
has also been guaranteed by the Company. In connection with the OEI acquisition,
the Company granted Mr. Edwards a percentage reversionary working interest in
five deep gas wells located in west Texas upon repayment of $1,622,000 of the
assumed bank debt from the Company's earnings from the five wells. The
percentage reversionary working interest decreases based on the date of
repayment of the assumed bank debt and ranges from 20% of the earnings from the
five wells if repayment occurs on or prior to July 7, 1995, to 5% of the
earnings from the five wells if repayment occurs after July 7, 1996.
Key leases automotive equipment from an independent third party. The
independent third party purchases the automotive equipment from an automobile
dealership in which a former officer owns a majority interest. Net proceeds to
the automobile dealership totaled $399,000 and $1,058,000 for the years ended
June 30, 1995 and June 30, 1994, respectively. The leases are considered
operating leases. In the opinion of the Board, the net proceeds from automotive
equipment were on terms at least as favorable to the Company as could have been
obtained from a third party. This opinion is based on information provided by a
third party leasing company, that is not affiliated with the officer or the
Company, to the Board regarding purchase prices and equipment lease rentals
offered by third parties.
In March of 1995, OEI completed a banking arrangement with Norwest. As
part of this banking relationship, seven individuals, some of whom are officers
and/or directors of the Company, pledged approximately $2.7 million in
collateral to secure OEI's credit facility. As compensation for this, the
Company paid these individuals a one-time fee which equaled 1% of the collateral
each individual placed. The Company also will pay these individuals a monthly
fee in the amount of 3% (annual rate) of the collateral pledged.
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Item 13. Exhibits:
Exhibit 10.1 Employment Agreement between Company and Francis D. John dated
as of July 1, 1995.
Exhibit 10.2 Employment Agreement between Company and C. Ron Laidley
dated as of July 1, 1995.
Exhibit 10.3 Employment Agreement between Company and Danny R. Evatt dated
as of July 1, 1995.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 to its
Report on Form 10-KSB to be signed on its behalf by the undersigned, thereunto
duly authorized.
KEY ENERGY GROUP, INC.
(Registrant)
By /s/ Francis D. John
Francis D. John
President, Chief Executive and Chief
Dated: October 31, 1995 Financial Officer and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Amendment No. 1 to the Registrant's Report on Form 10-KSB has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
By /s/ Francis D. John
Francis D. John
President, Chief Executive and Chief
Dated: October 31, 1995 Financial Officer and Director
By /s/ Morton Wolkowitz
Morton Wolkowitz
Dated: October 31, 1995 Chairman of the Board and Director
By /s/ Van Greenfield
Van Greenfield
Dated: October 31, 1995 Director
By /s/ William Manly
William Manly
Dated: October 31, 1995 Director
By /s/ D. Kirk Edwards
D. Kirk Edwards
Dated: October 31, 1995 Director
By /s/ Danny R..Evatt
Danny R. Evatt
Dated: October 31, 1995 Chief Accounting Officer
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (as from time to time amended in accordance
with the provisions hereof, this "Agreement"), dated as of July 1, 1995, is made
by and between FRANCIS D. JOHN, residing at 33 Penn Oak Trail, Newtown,
Pennsylvania 18940 (the "Executive") and KEY ENERGY GROUP, INC., a Maryland
corporation with its principal offices at 257 Livingston Avenue, New Brunswick,
New Jersey 08901 (the "Company").
Recitals
A. The Company desires to employ the services of the Executive as President
and Chief Executive Officer of the Company for the period and upon the terms and
conditions hereinafter set forth.
B. The Executive desires to serve in such capacities for the period and
upon the terms and conditions hereinafter set forth.
Agreement
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the Company and the Executive hereby agree as follows:
1. Employment; Term.
(a) The Company hereby agrees to employ the Executive, and the
Executive hereby accepts employment by the Company, as the Company's President
and Chief Executive Officer, such employment to commence as of July 1, 1995 (the
"Commencement Date"), and to continue until the close of business on June 30,
1998, 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, 1998, 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 herein as the "Employment Period").
<PAGE>
(b) The Company also hereby agrees that the Executive shall serve as a
director on the Board of Directors of the Company (the "Board"), and as a
director and either the President or Chairman of the Board of Directors of each
Subsidiary (as defined in Section 17 hereof), and the Executive hereby accepts
such appointments.
(c) The Executive shall have the responsibilities, duties and authority
commensurate with his positions as the President and Chief Executive Officer of
the Company, including without limitation the general supervision and control
over, and responsibility for, the general management and operation of the
Company and its Subsidiaries, subject, however, to the supervision of the Board
insofar as such supervision is required by the Maryland General Corporation Law.
The Executive will have the authority to employ and/or terminate the employment
of any employee of the Company or any Subsidiary thereof as he deems necessary
and appropriate, provided, however, that any terminations of employment of
employees subject to an employment agreement providing for the payment of cash
severance shall only be made at such times such that the severance obligations
to which the Company becomes obligated as a result thereof do not, together with
any previously incurred severance obligations at the time remaining unsatisfied,
exceed the amount provided for in a severance budget to be established by the
Executive from time to time and approved by the Board. 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 Board.
(d) 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 continue to serve on boards of directors on which he currently
serves 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.
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(e) The principal location at which the Executive will perform his duties
will be the Company's principal offices. The Company's principal offices may be
transferred by the Executive or by the Board, with the Executive's consent. In
the event of such a transfer, 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 a salary to the
Executive at the annual rate of Three Hundred Twenty-Five Thousand Dollars
($325,000) per year (the "Base Salary"), payable in substantially equal
installments in accordance with the Company's existing payroll practices, but no
less frequently than biweekly. 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 Board, taking into
account, among other factors, the Executive's performance and the performance of
the Company.
(b) The Executive shall receive, in recognition of and as compensation
for (i) the successful reorganization of the Company in fiscal year 1993 under
the leadership of the Executive, for which the Executive has not previously been
awarded any bonus; and (ii) the financial performance of the Company in fiscal
years 1993, 1994 and 1995, in each of which years the Company's actual results
of operations substantially exceeded projections, a cash bonus in the amount of
Two Hundred Fifty Thousand Dollars ($250,000), payable in four equal
installments of $62,500 each, payable on (A) the execution and delivery of this
Agreement, (B) January 1, 1996, (C) January 1, 1997, and (D) January 1, 1998;
provided, however, that installments payable subsequent to the date of this
Agreement shall bear interest at six percent (6%) per annum with interest to be
paid at the time such installment is payable.
(c) For each annual period commencing July 1, 1995, 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 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
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negotiated and agreed upon in good faith in advance by the Executive and the
Board. For the period commencing on July 1, 1995 and thereafter during the
Employment Period, the Executive will be eligible to participate in the
Incentive Plan, which will permit him to earn an annual bonus of up to thirty
percent (30%) of his Base Salary provided goals set forth in the Incentive Plan
are achieved. 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 also receive such bonuses other than pursuant
to the Incentive Plan in such amounts and at such times as the Board in its
discretion determines are appropriate to recognize extraordinary performance by
the Executive or the Company, which would include without limitation the
acquisition or sale of a division or divisions of the Company or of a Subsidiary
or Subsidiaries, or of the Company.
(e) 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. All air travel by the Executive may be in first class.
Any bonus mileage will be returned to the Company for the Company's use.
3. Stock Options. As performance-based incentive compensation to the
Executive in connection with his services to be rendered hereunder, the Company
agrees as follows:
(a) Subject to the approval by the stockholders of the Company of the
Company's 1995 Stock Option Plan (the "1995 Stock Option Plan"), the Company has
granted to the Executive:
(i) Options (the "350 Options") to acquire Three Hundred Fifty
Thousand (350,000) shares of the Common Stock of the Company at an exercise
price of $5.00 per share, which are fully vested as of the date of grant and
exercisable at any time prior to July 1, 2005. The 350 Options have been granted
pursuant to the Company's 1995 Stock Option Plan and pursuant to an agreement
substantially in the form attached hereto as Exhibit A.
(ii) Options (the "150 Options" and, together with the 350
Options, the "Options") to acquire One Hundred Fifty Thousand (150,000) shares
of the Common Stock of the Company at an exercise price of $5.00 per share, with
such options to vest on the first date occurring on or after July 1, 1996 but
prior to
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July 1, 1999 on which the fair market value (as defined in the form of agreement
attached hereto as Exhibit B) of the Common Stock of the Company shall equal at
least $9.50. The 150 Options shall be granted pursuant to the Company's 1995
Stock Option Plan and pursuant to an agreement substantially in the form
attached hereto as Exhibit B. The 150 Options shall also vest as set forth in
Section 5(e) upon the occurrence of certain events and will be subject to the
other terms set forth in Section 5(e).
The Executive understands that the Company has terminated the Stock
Grant Plan adopted by the Board on September 27, 1993 (the "1993 Stock Grant
Plan"), and the Executive consents to the termination of the 1993 Stock Grant
Plan and waives, releases and relinquishes any right he may have to receive any
Common Stock of the Company pursuant to such Plan.
(b) For each annual period commencing July 1, 1995, 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 1995 Stock Option Plan.
The performance goals for the grant of such options 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 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.
(d) The Company agrees, so long as the Company shall be subject to the
reporting requirements of Section 13 or 15(d) (or any successor provision) of
the 1934 Act (referred to herein as "1934 Act Registration"), it shall use its
best efforts to cause to remain effective a registration statement on Form S-8
(or a successor form) within ninety (90) days of the date such 1934 Act
Registration-becomes effective, and to maintain the effectiveness of such
registration statement, such that any restricted stock or
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options (including but not limited to the Options) granted to the Executive and
the purchase of shares by the Executive upon the exercise of any such options
shall be registered under the Securities Act of 1933, as amended or any
successor provision, and so long as he is an affiliate of the Company or if he
shall have exercised any of such options in whole or in part prior to the
effectiveness of such registration statement, to provide for and maintain the
effectiveness of a corresponding resale prospectus on Form S-3 providing for the
resale by the Executive of the shares so granted or purchased.
4. Benefit Plans; Vacations. In connection with the Executive's employment
hereunder, he shall be entitled during the Employment Term (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 Schedule 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 twenty (20)
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 Company shall lease an automobile for the Executive
substantially similar to the automobile currently leased for the executive and
shall pay all expenses, including but not limited to repair and maintenance,
incurred by the Executive in connection with the use of the automobile during
the Employment Term.
(d) The Company will pay the reasonable fees for personal income tax
return preparation and tax audit services as reasonably requested by the
Executive, provided by certified public accountants and tax attorneys acceptable
to him.
(e) The Company shall pay the reasonable expenses of a home
office for the Executive.
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(f) 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.
(g) 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
management of the Company 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
his incapacity
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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
Board 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
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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
obligations 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 to be nominated by the Board for election
to the Board at any time such nominations are made, or
failure of the stockholders of the Company to elect the
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Executive to the Board, or failure of the Board to elect the Executive
as President and Chief Executive Officer of the Company, or failure to
be nominated by the Board of Directors of any Subsidiary for election
to such Board of Directors at any time such nominations are made, or
failure of the stockholders of any Subsidiary to elect the Executive to
the Board of Directors of such Subsidiary, or failure of the Board of
Directors of any Subsidiary to elect the Executive as President or
Chairman of the Subsidiary, or removal from the Board, the Board of
Directors of a Subsidiary or any such office of the Company or of a
Subsidiary, 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 President and Chief
Executive 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
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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 nonconformance 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
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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 or by the Company (or its successors) 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), the Executive shall be entitled, in
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addition to the other compensation and benefits herein provided for, to
severance compensation in an aggregate amount equal to the product of (I) three
(3) times (II) his Base Salary at the rate in effect on the termination date,
payable in thirty-six (36) 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, such severance compensation shall be paid 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) three (3) times (B) his Base Salary at the rate in effect on the termination
date, payable in thirty-six (36) 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, any
restricted stock or unexpired options (including without limitation the Options)
held by the Executive entitling the Executive to purchase securities of the
Company shall, notwithstanding any contrary provision in the agreement or plan
pursuant to which such restricted stock or options were granted, vest and/or be
exercisable for an exercise period of at least twelve (12) months following such
termination date or such longer period as set forth in the pertinent option
agreement.
(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 150 Options) not
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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 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
Options) held by the Executive entitling the Executive to purchase securities of
the Company shall, notwithstanding any contrary provision in the agreement or
plan pursuant to which such restricted stock or options were granted, vest
and/or be exercisable for an exercise period of at least twelve (12) months
following such termination date or such longer period as set forth in the
pertinent option agreement.
(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 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 the Section 5(f)(ii)
hereof, in the event the 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):
(A) 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
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at the Company's expense for a period of time following the termination
date ending on the first to occur of (I) the third 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.
(B) The Executive shall be entitled, at the Company's expense
for a period of time following the termination date ending on the first
to occur of (A) the third anniversary of the termination date or (B)
the date on which the Executive commences full-time employment by
another employer or becomes self-employed on a full-time basis, to
office space located within ten (10) miles of the principal offices of
the Company and secretarial services substantially commensurate with
the office space and secretarial services furnished by the Company to
the Executive prior to the termination date, and to be furnished
executive job search and employment services by an executive employment
firm of national reputation selected by the Executive and approved by
the Board, which approval shall not be unreasonably withheld or
delayed.
(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
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<PAGE>
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 and bonuses as has accrued (including
without limitation as provided below) 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.
The amount due to the Executive (or his estate) under this Section 5(g) in
payment of any bonus, including without limitation the Annual Bonus and/or
Annual Stock Option Grant, shall be a proportionate amount of the bonus that
would next be payable to him and would otherwise have been due to the Executive
if such termination had not occurred and such bonus had been fully earned, and
which proportion shall be based on the number of elapsed days in the applicable
bonus period prior to the termination date and in which the termination date
occurs.
(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 the 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 the prior written consent of the Board,
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<PAGE>
participate or engage in, whether as a director, officer, employee, advisor,
consultant, stockholder, partner, joint venturer, owner or in any other
capacity, any business engaged in the business of furnishing oilfield 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 pay the Executive's reasonable fees for
legal and tax advice and other related expenses associated with the negotiation
and completion of this Agreement. 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
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<PAGE>
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 a 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. This Agreement, together with the
Indemnification Agreement, 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,
cancelled 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 and Binding Nature/Nonassignability. This Agreement shall be
binding upon and inure to the benefit of the successors and permitted assigns of
the respective parties hereto. This Agreement and the rights and obligations
hereunder are personal
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<PAGE>
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 provisions of this Agreement, and provided, further, this Agreement
shall inure to the benefit of the Executive's estate, heirs, executors,
administrators, personal and legal representatives, distributees, devisees, and
legatees. Notwithstanding the foregoing provisions of this Section 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.
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<PAGE>
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:/s/ Morton Wolkowitz
Name: Morton Wolkowitz
Title: Chairman Compensation Committee
Co-Chairman of Board of Directors
/s/ Francis D. John
FRANCIS D. JOHN
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<PAGE>
SCHEDULE B
Company Paid Coverages
1. Life Insurance
$1,500,000 without a physical exam, payable to
beneficiary designated by the Executive.
$1,000,000, payable to the Company.
2. Business Travel Accident Insurance
Death and dismemberment benefits up to $500,000 with
twenty-four hour business and pleasure travel
coverage.
3. 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 base salary and bonus
compensation.
4. Medical and Dental Plan
Comprehensive medical and dental plans subject to
annual deductible not to exceed $1,000 and providing
for an annual physical.
5. Director and Officer Liability Insurance
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Yale E. Key, Inc.
257 Livingston Avenue
New Brunswick, NJ 08901
As of July 1, 1995
Mr. C. Ron Laidley
c/o Yale E. Key, inc.
, Texas
EMPLOYMENT AGREEMENT
Dear Mr. Laidley:
Yale E. Key, Inc., a Texas corporation (the "Company"), with its principal
offices at the address set forth above, and you, an individual residing at your
address set forth above, agree as
follows:
1. Employment; Term. (a) The Company agrees to employ you, and you accept
employment by the Company, as President of the Company. Your employment will
commence as of July 1, 1995 (the "Commencement Date") and continue until the
close of business on June 30, 1998, subject to extension as provided in this
Section 1(a), unless sooner terminated in accordance with this Letter (the
"Initial Employment Period"). On each June 30, commencing with June 30, 1998,
the term of your employment will be automatically extended for twelve (12)
months unless either you or the Company gives written notice to the other, no
later than thirty (30) days prior to the relevant June 30th, that such automatic
extension shall not occur. The Initial Employment Period, together with any
extensions, until termination in accordance herewith is referred to herein as
the "Employment Period".
(b) You will have the usual duties of a President and will be responsible,
subject to the Chairman of the Board and the Board of Directors of the Company
(the "Board"), for participating in the management and direction of the
Company's business and operations. You will, if elected, serve as a director of
the Company and as an officer and/or director of one or more of Key Energy
Group, Inc. and its subsidiaries and perform all duties incident to such offices
and such specific other tasks as may from time to time be assigned to you by the
Chairman of the Board or the Board or by the President of Key
<PAGE>
Energy Group, Inc. During the Employment Period, you will devote your full
time and best efforts to the business and affairs of the Company and Key Energy
Group, Inc. and its subsidiaries.
2. Salary; Bonuses; Expenses.
(a) During the Employment Period, the Company will pay a salary to you at
the annual rate of One Hundred Ninety-Two Thousand Dollars ($192,000) 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.
(b) For each fiscal year of the Company commencing after June 30, 1995, you
will be eligible to participate in an incentive plan for key employees and other
persons involved in the business of Key Energy Group, Inc. and its subsidiaries
(the "Incentive Plan") providing for the payment of cash bonuses of up to fifty
percent (50%) of your Base Salary and, subject to the approval by the
stockholders of Key Energy Group, Inc., in the 1995 Stock Option Plan of Key
Energy Group, Inc. (the "1995 Stock Option Plan").
(c) You will be reimbursed by the Company for reasonable travel, lodging,
meal and other expenses incurred by you in connection with performing your
services hereunder in accordance with the Company's policies from time to time
in effect.
3. Stock Options. (a) As performance-based incentive compensation to you in
connection with your services hereunder, there shall be granted to you, subject
to the approval by the stockholders of Key Energy Group, Inc. of the 1995 Stock
Option Plan, options (the "Options") to acquire One Hundred Twenty Five Thousand
(125,000) shares of the Common Stock, par value $.10 per share, of Key Energy
Group, Inc. (the "Common Stock") at an exercise price of $5.00 per share, with
such options to be granted pursuant to, and subject to the terms and provisions
(including vesting provisions) of, the 1995 Stock Option Plan and an agreement
substantially in the form attached hereto as Exhibit A.
(b) Key Energy Group, Inc. has terminated the 1993 Stock Grant Plan adopted
by Key Energy Group, Inc. on September 27, 1993 (the "1993 Stock Grant Plan"),
and you hereby consent to the termination of the 1993 Stock Grant Plan and
waive, release and relinquish any right you may have to receive any Common Stock
pursuant to such Plan.
-2-
<PAGE>
4. Benefit Plans; Vacations. You will be entitled during the Employment
Period (and thereafter to the extent provided in Section 5(d) below) to such
fringe benefits, including without limitation group medical and dental, life,
executive life, accident and disability insurance, retirement plans and
supplemental and excess retirement benefits and a Company-leased automobile and
payment of expenses associated therewith, as the Company may provide from time
to time for its senior management; not less than twenty (20) vacation days.
5. Termination; Change of Control; etc.
(a) Termination by Company. The Company shall have the right to terminate
your employment under this Letter for Cause at any time without obligation to
make any further payments to you hereunder. The Company shall have the right to
terminate your employment for any reason other than for Cause, subject only to
the Company's obligations under Section 5(d) below. As used in this Letter, the
term "Cause" shall mean (i) the willful and continued failure by you to
substantially perform your duties hereunder (other than any such willful or
continued failure resulting from your incapacity due to physical or mental
illness or physical injury), or (ii) the willful engaging by you in misconduct
which is materially injurious to the Company, monetarily or otherwise, or (iii)
your conviction of a felony by a court of competent jurisdiction.
(b) Termination upon Disability. If you become totally and permanently
disabled during the Employment Period so that you are unable to perform your
obligations hereunder by reasons involving physical or mental illness or
physical injury ("Disability"), then the term of your employment hereunder may
be terminated by the Company.
(c) Termination by Executive. You may terminate your employment by giving
written notice to the Company at any time by written notice of at least thirty
(30) days.
(d) Severance Compensation. In the event your employment hereunder is
terminated following a change of control of the Company or by you because of a
material breach by the Company of its obligations under this Letter or by the
Company other than for Cause, you will be entitled to severance compensation at
your Base Salary at the monthly rate in effect on the termination date, payable
in arrears, during the period expiring eighteen (18) months after the
termination date, commencing at the end of the calendar month in which the
termination date occurs; provided, however, that in the event your employment
-3-
<PAGE>
should be terminated by the Company as a result of Disability in accordance
with Section 5(b) above, then the severance compensation to which you are
entitled shall be reduced by the amount of any disability insurance proceeds
actually paid to you or for your benefit during the said time period.
6. Limitation on Competition. During the Employment Period, and for such
period thereafter as you are entitled to receive severance compensation under
this Agreement or, if not entitled to receive severance compensation, for a
period of one year after your termination, (a) you shall not, directly or
indirectly, without the prior written consent of the Company, participate or
engage in, whether as a director, officer, employee, advisor, consultant,
stockholder, partner, joint venturer, owner or in any other capacity, any
business engaged in the business of furnishing oilfield services or the
drilling, production or sale of natural gas or crude oil (a "Competing
Enterprise"), provided, however, that you shall not be deemed to be
participating or engaging in any such business solely by virtue of your
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 (b) you shall not, directly or
indirectly, solicit, raid, entice or otherwise induce any employee of the
Company or of Key Energy Group, Inc. or any of its subsidiaries to be employed
by a Competing Enterprise.
If this Letter correctly sets forth your understanding of the agreement
between the Company and you, please indicate your agreement hereto by signing
this Letter in the space for that purpose below.
YALE E. KEY
By:/s/ Francis D. John
Name: Francis D. John
Title: President
ACCEPTED AND AGREED:
/s/ C. Ron Laidley
C. Ron Laidley
-4-
Key Energy Group, Inc.
257 Livingston Avenue
New Brunswick, NJ 08901
As of July 1, 1995
Mr. Danny R. Evatt
c/o Key Energy Group, Inc.
257 Livingston Avenue
New Brunswick, NJ 08901
EMPLOYMENT AGREEMENT
Dear Mr. Evatt:
Key Energy Group, Inc., a Maryland corporation (the "Company") with its
principal offices at the address set forth above, and you, an individual
residing at your address set forth above, agree as follows:
1. Employment; Term. (a) The Company agrees to employ you, and you accept
employment by the Company, as the Company's Chief Accounting Officer and
Treasurer. Your employment will commence as of July 1, 1995 (the "Commencement
Date") and continue until the close of business on June 30, 1998, subject to
extension as provided in this Section 1(a), unless sooner terminated in
accordance with this Letter (the "Initial Employment Period"). On each June 30,
commencing with June 30, 1998, the term of your employment will be automatically
extended for twelve (12) months unless either you or the Company gives written
notice to the other, no later than thirty (30) days prior to the relevant June
30th, that such automatic extension shall not occur. The Initial Employment
Period, together with any extensions, until termination in accordance herewith
is referred to herein as the "Employment Period".
(b) You will have the usual duties of a Chief Accounting Officer and
Treasurer and will be responsible, subject to the President and the Board of
Directors of the Company (the "Board"), for participating in the management and
direction of the Company's business and operations. You will, if elected, serve
as a director of the Company and as an officer and/or director of one or more
Subsidiaries (as defined below) and perform all duties incident to such offices
and will perform such specific other tasks, consistent with your position as
Chief Accounting Officer and Treasurer, as may from time to time be
<PAGE>
assigned to you by the President or the Board. Without limiting the
immediately preceding sentence, the Company will cause you to be appointed as
the Chief Accounting Officer, Treasurer and Secretary of Yale E. Key, Inc., a
wholly owned Subsidiary of the Company. During the Employment Period, you will
devote your full time and best efforts to the business and affairs of the
Company and its subsidiaries.
2. Salary; Bonuses; Expenses.
(a) During the Employment Period, the Company will pay a salary to you at
the annual rate of One Hundred Five Thousand Dollars ($105,000) 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.
(b) For each fiscal year of the Company commencing after June 30, 1995, you
will be eligible to participate in an incentive plan for key employees and other
persons involved in the business of the Company and its subsidiaries (the
"Incentive Plan") providing for the payment of cash bonuses of up to thirty
percent (30%) of your Base Salary and, subject to the approval by the
stockholders of the Company, in the 1995 Stock Option Plan of the Company (the
"1995 Stock Option Plan").
(c) You will be reimbursed by the Company for reasonable travel, lodging,
meal and other expenses incurred by you in connection with performing your
services hereunder in accordance with the Company's policies from time to time
in effect.
3. Stock Options. (a) As performance-based incentive compensation to you in
connection with your services hereunder, there shall be granted to you, subject
to the approval by the stockholders of the Company of the 1995 Stock Option
Plan, options (the "Options") to acquire Fifty Thousand (50,000) shares of the
Common Stock, par value $.10 per share, of the Company (the "Common Stock") at
an exercise price of $5.00 per share, with such options to be granted pursuant
to, and subject to the terms and provisions (including vesting provisions) of,
the 1995 Stock Option Plan and an agreement substantially in the form attached
hereto as Exhibit A.
(b) The Company has terminated the 1993 Stock Grant Plan adopted by the
Company on September 27, 1993 (the "1993 Stock Grant Plan"), and you hereby
consent to the termination of the 1993 Stock Grant Plan and waive, release and
relinquish any right you may have to receive any Common Stock pursuant to such
Plan.
-2-
<PAGE>
4. Benefit Plans; Vacations. You will be entitled during the Employment
Period (and thereafter to the extent provided in Section 5(d) below) to such
fringe benefits, including without limitation group medical and dental, life,
executive life, accident and disability insurance, retirement plans and
supplemental and excess retirement benefits and a Company-leased automobile and
payment of expenses associated therewith, as the Company may provide from time
to time for its senior management; not less than fifteen (15) vacation days.
5. Termination; Change of Control; etc.
(a) Termination by Company. The Company shall have the right to terminate
your employment under this Letter for Cause at any time without obligation to
make any further payments to you hereunder. The Company shall have the right to
terminate your employment for any reason other than for Cause, subject only to
the Company's obligations under Section 5(d) below. As used in this Letter, the
term "Cause" shall mean (i) the willful and continued failure by you to
substantially perform your duties hereunder (other than any such willful or
continued failure resulting from your incapacity due to physical or mental
illness or physical injury), or (ii) the willful engaging by you in misconduct
which is materially injurious to the Company, monetarily or otherwise, or (iii)
your conviction of a felony by a court of competent jurisdiction.
(b) Termination upon Disability. If you become totally and permanently
disabled during the Employment Period so that you are unable to perform your
obligations hereunder by reasons involving physical or mental illness or
physical injury ("Disability"), then the term of your employment hereunder may
be terminated by the Company.
(c) Termination by Executive. You may terminate your employment by giving
written notice to the Company at any time by written notice of at least thirty
(30) days.
(d) Severance Compensation. In the event your employment hereunder is
terminated by you because of a material breach by the Company of its obligations
under this Letter or by the Company other than for Cause, you will be entitled
to severance compensation at your Base Salary at the monthly rate in effect on
the termination date, payable in arrears, during the period expiring twelve (12)
months after the termination date, commencing at the end of the calendar month
in which the termination date occurs; provided, however, that in the event your
employment should be terminated by the Company as a result
-3-
<PAGE>
of Disability in accordance with Section 5(b) above, then the severance
compensation to which you are entitled shall be reduced by the amount of any
disability insurance proceeds actually paid to you or for your benefit during
the said time period.
6. Limitation on Competition. During the Employment Period, and for such
period thereafter as you are entitled to receive severance compensation under
this Agreement or, if not entitled to receive severance compensation, for a
period of one year after your termination, (a) you shall not, directly or
indirectly, without the prior written consent of the Company, participate or
engage in, whether as a director, officer, employee, advisor, consultant,
stockholder, partner, joint venturer, owner or in any other capacity, any
business engaged in the business of furnishing oilfield services or the
drilling, production or sale of natural gas or crude oil (a "Competing
Enterprise"), provided, however, that you shall not be deemed to be
participating or engaging in any such business solely by virtue of your
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 (b) you 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.
If this Letter correctly sets forth your understanding of the agreement
between the Company and you, please indicate your agreement hereto by signing
this Letter in the space for that purpose below.
KEY ENERGY GROUP, INC.
By: /s/ Francis D. John
Name: Francis D. John
Title: President
ACCEPTED AND AGREED:
/s/ Danny R. Evatt
Danny R. Evatt
-4-
