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8-K
KEY ENERGY SERVICES INC filed this Form 8-K on 12/05/2017
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8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 5, 2017 (November 29, 2017)

 

 

Key Energy Services, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-08038   20-2648081

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification No.)

 

1301 McKinney Street, Suite 1800

Houston, Texas 77010

(Address of principal executive offices)

Registrant’s telephone number, including area code: (713) 651-4300

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 


Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers

On November 29, 2017, the Compensation Committee (the “Committee’) of the Board of Directors of Key Energy Services, Inc. (the “Company”) approved certain executive compensation items through a unanimous written consent, as described in greater detail below.

Employment Agreements

In connection with her promotion as the Company’s Senior Vice President, General Counsel and Corporate Secretary, as previously reported on the Company’s Form 8-K filed on September 12, 2017, the Committee approved the terms for an employment agreement to be entered into with Ms. Hargis effective on or around December 4, 2017 (the “Hargis Employment Agreement”), which will supersede and replace that certain Change of Control Agreement between the Company and Ms. Hargis dated January 6, 2014. The Hargis Employment Agreement provides for an annual base salary of $300,000 and a target annual equity compensation award equal to 65,000 shares of equity-based compensation awards. Additionally, the Committee approved the terms for an employment agreement to be entered into with David Brunnert, the Company’s Senior Vice President and Chief Operating Officer, to be effective on or around December 4, 2017 (the “Brunnert Employment Agreement,” and together with the Hargis Employment Agreement, the “Employment Agreements”), which will supersede and replace that certain Amended and Restated Change of Control Agreement dated January 31, 2017. The Brunnert Employment Agreement provides for an annual base salary of $350,000. The Employment Agreements contain certain confidentiality and intellectual property covenants.

Upon a termination of Ms. Hargis’ or Mr. Brunnert’s employment with the Company (i) by the Company without “cause” (as defined in the Employment Agreements), (ii) by the expiration of the term of the Employment Agreements due to the Company delivering a notice of non-renewal, (iii) due to death or “disability” (as defined in the Employment Agreements), or (iv) by the executive for “good reason” within one year following a “change of control” (each as defined in the Employment Agreements), in each case, subject to the execution and non-revocation of a release, the Company will provide (x) a lump sum severance payment equal to the executive’s annual base salary, (y) continued coverage under the Company’s medical and dental benefit plans for 12 months, and (z) accelerated vesting of outstanding equity awards. If any amounts due to the executive on a termination of employment with the Company by the executive for good reason within one year following a change of control is includable in the executive’s gross income under Section 409A of the Internal Revenue Code of 1986, as amended, then the Company will pay an additional amount necessary to pay the executive for additional income taxes on such amounts.

The foregoing description of the Employment Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Employment Agreements, a copy of which is filed as Exhibit 10.1.

Replacement Equity Awards

On November 29, 2017, the Committee approved certain modifications to the Company’s equity-based awards granted to employees, including each of the named executive officers, during the 2016 calendar year (the “2016 Awards”). Such modifications were determined to be appropriate and necessary for retention and incentive purposes. The Committee confirmed that the first tranche of the 2016 Awards, including both time-based awards and performance-based awards, will vest as scheduled in December 2017 subject to the satisfaction of the original vesting terms. The Committee next approved providing each holder of 2016 Awards with the option to either (i) continue to hold the remainder of the 2016 Awards that did not vest in December 2017 pursuant to their original terms, or (ii) forfeit the remaining 2016 Awards in exchange for a new grant made up of 50% time-vested restricted stock unit awards (the “Time RSU Award”) and 50% performance share awards (the “Performance RSU Award”).

The Time RSU Awards will represent the right to receive one share of common stock of the Company for each vested restricted stock unit. The Time RSU Award will become vested as to 1/3 of the restricted stock units on each anniversary of the date of grant. Upon a termination of the holder’s employment for any reason, any portion of the Time RSU Award which remains unvested will be forfeited; provided, however, that if the holder’s employment is terminated by the Company without “cause” (as defined in the Time RSU Award) or by the holder for “good reason” (as defined in the Time RSU Award), in each case, within 12 months following a “change of control” (as defined in the Time RSU Award), then any portion of the Time RSU Award which remains unvested will become vested.


The Performance RSU Awards will represent the right to earn one share of common stock of the Company for each vested restricted stock unit. The Performance RSU Awards will settle following the end of the performance period with respect to the 2020 calendar year; however, one-third of the restricted stock units are earned based on the EBITDA-based performance goals achieved over each of the performance periods with respect to the 2018, 2019, and 2020 calendar years. Upon a termination of the holder’s employment for any reason, any portion of the Performance RSU Award which remains unvested will be forfeited.

The foregoing description of the Time RSU Award and the Performance RSU Award does not purport to be complete and is qualified in its entirety by reference to the full text of the Time RSU Award and the Performance RSU Award, copies of which are filed as Exhibit 10.2 and Exhibit 10.3, respectively.

 

Item 9.01 Financial Statements and Exhibits

 

(d) Exhibits.

 

10.1 Form of Employment Agreement for Katherine Hargis and David Brunnert.

 

10.2 Form of Time-Vested Restricted Stock Unit Award Agreement.

 

10.3 Form of Performance-Based Restricted Stock Unit Award Agreement.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized.

 

    KEY ENERGY SERVICES, INC.
Date: December 5, 2017     By:  

/s/ Robert Drummond

     

Robert Drummond

President and Chief Executive Officer

EX-10.1

Exhibit 10.1

[NAME]

EMPLOYMENT AGREEMENT

KEY ENERGY SERVICES, LLC (the “Company”), a Texas limited liability company with its principal offices at 1301 McKinney Street, Suite 1800, Houston, Texas 77010, and                      (“Employee”) enter into this Employment Agreement (this “Agreement”) effective the      day of              201     (the “Commencement Date”) in order to outline the terms and conditions of Employee’s employment relationship with the Company during the term of this Agreement. Employee and the Company hereby agree as follows:

1. Employment; Term of Agreement. Employee agrees to devote his full time and best efforts to serve as                     , for the Company, having those duties and title specified from time to time by the Chief Executive Officer, Senior Officers or the Board of Directors (the “Board”) of Key Energy Services, Inc. (“Key”). This Agreement will continue until the close of business on             , 201_, unless earlier terminated in accordance with its terms, and shall be automatically renewed for successive one-year terms unless either Employee or the Company gives written notice to the other, no later than thirty (30) days prior to the expiration of the then-current term that such automatic extension shall not occur (“Notice of Non-Renewal”). Employee will, if elected, serve as an officer and/or director of the Company, its parent, subsidiaries or affiliates (collectively, the “Key Companies”) and perform all duties incident to such offices. This Agreement supersedes and replaces the Change of Control Agreement between Employee and the Company dated              201    .

2.    Salary; Bonus; Expenses. The Company will pay a salary to Employee at the annual rate of                      and NO/100 ($    ,000.00) (the “Base Salary”), payable in substantially equal installments in accordance with the Company’s existing payroll practices, but no less frequently than monthly. Senior management of the Company will have discretion to review Employee’s compensation from time to time as it deems appropriate and may, in its sole discretion, increase Employee’s Base Salary. In addition, Employee shall be eligible to participate in incentive plans in effect from time to time for the Key Companies’ similarly-situated executives, key employees and other persons involved in the business of the Company and in the Key Companies’ stock-based incentive plans outstanding from time to time. Under the Key Companies’ annual incentive bonus plan and subject to the terms of the governing plan, Employee may be eligible to earn a discretionary cash bonus, with the amount of any such bonus in any given year to be determined by the senior management of the Company or the Board (or a committee thereof) in their sole discretion, based upon the level of achievement of goals mutually established by Employee and the senior management of the Company (subject to Board approval). Such bonus shall be paid to Employee no later than March 15 of the year following the year to which it applies, as a “short-term deferral” under Treas. Reg. 1.409A-1(b)(4). Employee will be reimbursed by the Company for reasonable travel, lodging, meals and other expenses incurred by Employee in connection with performing his services hereunder in accordance with the Key Companies’ policies as in effect from time to time.

3. Vacations; Benefits. Employee will be entitled to (i) not less than 20 vacation days per calendar year (prorated for any partial year of service), with no carryover to subsequent years, and (ii) participation in such other fringe benefits, including, without limitation, personal time off, group medical and dental, life, accident and disability insurance, retirement plans and supplemental

 

Employment Agreement of                     

 


and excess retirement benefits as the Company may provide from time to time for similarly-situated employees of the Company; provided, however, that during the term of this Agreement, Employee shall not be entitled to or eligible for severance under any other plan, program, policy, or agreement.

4. Termination and Severance. Employee’s employment is at-will and may be terminated by Employee or the Company for any reason at any time during the term of this Agreement, subject to the severance provisions below. Employee agrees that he has fully negotiated this Section 4 of his Agreement with the Company to provide for sufficient severance pay, as appropriate, upon termination of employment.

 

  (a) Termination of Employment by the Company for Cause; Termination of Employment by Employee other than for Good Reason or Within 10 Days of Company Providing Notice of Non-Renewal. In the event (i) Employee’s employment is terminated by the Company for Cause or (ii) Employee voluntarily terminates his employment for any reason other than (y) Good Reason following a Change in Control, as described below, or (z) within 10 days following Notice of Non-Renewal by the Company, the Company shall have no further obligations to Employee except that accrued but unpaid salary through Employee’s termination date and any expense reimbursements owed Employee through the date of termination. As used in this Agreement, the term “Cause” shall mean (1) the willful and continued failure by Employee to substantially perform Employee’s duties hereunder (other than any such willful or continued failure resulting from Employee’s incapacity due to Employee’s Disability (defined below)), (2) repeated substandard work performance or repeated unreliability that has not been cured to the Company’s satisfaction after notice of the same as has been provided to Employee; (3) serious workplace misconduct, (4) Employee’s engagement in misconduct that Employee knows or should know reasonably could be injurious to any of the Key Companies, monetarily or otherwise (including injurious to the reputation of such Company); (5) Employee’s conviction of a felony by a court of competent jurisdiction or a plea of no contest to a felony charge, (6) fraud or other material dishonesty against any of the Key Companies, (7) the breach of any of the provisions hereof, or (8) the violation by Employee of any of the Key Companies’ policies, rules or guidelines as in effect from time to time, including without limitation, the Code of Business Conduct, securities trading policy or anti-trust policy.

 

  (b)

Involuntary Termination of Employment Because of Death, Disability, or other than for Cause. In the event Employee’s employment is involuntarily terminated during the term of the Agreement (i) by Employee’s death, (ii) due to Employee’s Disability (as defined below), or (iii) by the Company other than for Cause, Employee will be eligible to receive (x) a lump sum severance payment equal to Employee’s annual Base Salary, less applicable deductions and withholdings, on the thirtieth (30th) day following Employee’s termination, (y) continued coverage for Employee and his dependents under the Company’s medical and dental benefit plans for 12 months at a cost to Employee equal to the cost of such coverage for similarly-

 

Employment Agreement of                     

 

2


  situated employees of the Company, which continued coverage shall immediately end upon obtainment of new employment and coverage under a similar welfare benefit plan (with the obligation to promptly report such new coverage to the Company) and (z) accelerated vesting and immediate exercisability of all outstanding equity awards previously granted to Employee, with the vesting of equity awards that are based in whole or in part on performance being determined by the Board (or a committee thereof) in compliance with Section 162(m) of the Internal Revenue Code and the regulations promulgated thereunder. Employee shall not be eligible to receive the severance payment, the continued coverage or the accelerated vesting unless and until he (or in the event of Employee’s death, his estate) executes and returns on a timely basis, without revoking, a release of claims in a form acceptable to the Company. As used in this Agreement, the term “Disability” means Employee’s inability, with or without reasonable accommodation, to perform Employee’s obligations and duties hereunder by reason of physical or mental illness or injury for a period of 120 days.

(c) Notice of Non-Renewal by Company. In the event the Company provides Employee with Notice of Non-Renewal of the Agreement at the end of the then-current term and the Company (i) terminates Employee’s employment at the end of the then-current term or (ii) does not terminate Employee’s employment at the expiration of the then-current term, but Employee provides the Company with notice of resignation within ten business days from Employee’s receipt of such Notice of Non-Renewal, Employee will be eligible to receive (x) a lump sum payment equal to Employee’s annual Base Salary at the time of termination of employment, less applicable deductions and withholdings, on the thirtieth (30th) day following termination of the Agreement, (y) continued coverage for Employee and his dependents under the Company’s medical and dental benefit plans for 12 months at a cost to Employee equal to the cost of such coverage for similarly-situated employees of the Company, which continued coverage shall immediately end upon obtainment of new employment and coverage under a similar welfare benefit plan (with the obligation to promptly report such new coverage to the Company) and (z) accelerated vesting and immediate exercisability of all outstanding equity awards previously granted to Employee, with the vesting of equity awards that are based in whole or in part on performance being determined by the Board (or a committee thereof) in compliance with Section 162(m) of the Internal Revenue Code and the regulations promulgated thereunder. Employee shall not be eligible to receive the severance payment, the continued coverage or the accelerated vesting unless and until he (or in the event of Employee’s death, his estate) executes and returns on a timely basis, without revoking, a release of claims in a form acceptable to the Company.

 

  (d) Involuntary Termination following a Change of Control. If, within one year following a Change of Control (as defined in Exhibit A) of Key, Employee resigns with Good Reason, as that term is defined below, then Employee will be entitled to receive the payments and benefits set forth in Section 4(b) above.

 

Employment Agreement of                     

 

3


Good Reason” shall mean the occurrence of one or more of any of the following without Employee’s consent within one year of the effective date of a Change in Control:

(1) A material diminution in Employee’s base compensation, authority, duties or responsibilities from those in effect immediately prior to the date a Change in Control occurs;

(2) The requirement that Employee primarily perform services under this Agreement from a location that is thirty (30) miles or greater from the location at which Employee was required to primarily perform services immediately prior to the date a Change in Control occurs; or

(3) Any other action or inaction by the Company that constitutes a material breach of this Agreement.

Good Reason shall only be found to exist where (x) Employee provided written notice to Company of the existence of one of the above conditions within 90 days of the initial existence of such condition, (y) the Company was provided 30 days from the date of Employee’s notice to remedy that condition (the “Cure Period”), and (z) the condition was not remedied by the Company during the Cure Period.

 

  (e) Special Rules Pertaining to Termination. For purposes of this Agreement, Employee’s employment will not be considered to have terminated unless, as a result of a termination, Employee has had a “separation from service” (as that term is defined in Treas. Reg. § 1.409A-1(h)) with the “Key Energy Controlled Group.” The term “Key Energy Controlled Group” means the group of corporations and trades or businesses (whether or not incorporated) composed of the Company and every entity or other person which together with the Company constitutes a single “service recipient” (as that term is defined in Treas. Reg. § 1.409A-1(g)) as the result of the application of Treas. Reg. § 1.409A-1(h)(3).

5. Protection of Confidential Information. During Employee’s employment relationship with the Company, the Company has provided and will continue to provide access to information that is among its increasing body of trade secrets, engineering data, proprietary data, intellectual property, customer data, or other confidential information of the Key Companies, which will be necessary for Employee to perform his duties and responsibilities to the Company. Employee’s position is a position of trust and confidence that involves working with the Key Companies’ Confidential Information and developing additional Confidential Information for use by the Key Companies. The Company has disclosed and will continue to disclose or grant access to Confidential Information to Employee after Employee’s execution and delivery of this Agreement, in which Employee agrees to protect Confidential Information and in which Employee acknowledges the terms of which are no more restrictive than necessary to protect the Key Companies’ legitimate business interests, including Confidential Information and goodwill.

 

Employment Agreement of                     

 

4


  (a) Non-disclosure Obligation. During the period of Employee’s employment and forever thereafter, Employee will not, without the express written consent of the Chief Executive Officer or the General Counsel or Chief Legal Officer of Key, directly or indirectly communicate or divulge to, or make available to, or use for Employee’s own benefit or for the benefit of any competitor or any other person or entity, any Confidential Information, except to the extent that disclosure is required (i) at the Company’s direction or (ii) by a court or other governmental agency of competent jurisdiction.

 

  (b) Confidential Information Defined.Confidential Information” refers to any item of information, or a compilation of information, in any form (tangible or intangible), related to the Key Companies’ business that the Key Companies have not made public or authorized public disclosure of, and that is not generally known to the public or to other persons who might obtain value or competitive advantage from its disclosure or use. Confidential Information will not lose its protected status under this Agreement if it becomes generally known to the public or to other persons through improper means such as the unauthorized use or disclosure of the information by Employee or another person. Confidential Information includes, but is not limited to, personnel information (including information relating to any and all aspects of compensation of any and all employees of the Key Companies), ideas, discoveries, designs, inventions, improvements, trade secrets, engineering data, proprietary data, intellectual property, customer data, technology, know-how, manufacturing processes, design specifications, writings and other works of authorship, computer programs, financial information, accounting information, organizational structure, Key Companies’ expenditures, marketing plans, customer lists and data, business plans or methods and the like, that relate in any manner to the actual or anticipated business of the Key Companies, as well as any and all information regarding the Key Companies other than information disclosed in public filings under the Securities Exchange Act of 1934, as amended. Confidential Information shall not include information that is publicly available, unless such information became publicly available by reason of a breach of this Agreement by Employee.

 

  (c)

Steps to Protect Information. At all times, Employee agrees to use all reasonable and available methods to prevent the unauthorized use or disclosure of Confidential Information. Depending upon the circumstances, available methods may include but are not limited to: marking information “Confidential,” sharing information with authorized persons only on a need-to-know basis, maintaining the integrity of password protected computer systems, and otherwise storing information in a manner that prevents unauthorized access. Employee shall maintain at his work station and/or any other place under his control only such Confidential Information as he has a current “need to know” in the furtherance of the Key Companies’ business. Employee shall return to the appropriate person or location or otherwise properly dispose of Confidential Information once that need to know no longer exists. Employee shall not make copies of or otherwise reproduce Confidential Information unless there is a legitimate business need of the Key Companies for reproduction. Employee shall not store electronic data of the Key Companies, including but not limited to Confidential Information, on any electronic storage

 

Employment Agreement of                     

 

5


  device that is not owned by the Company without prior consent of the Company. If Employee does store electronic data on an electronic storage device that is not owned by the Company, with or without consent of the Company, Employee hereby agrees to surrender within three (3) business days following demand by the Company any and all such electronic storage devices to the Company for inspection, data retrieval, and data removal.

 

  (d) Return of Confidential Information. Employee agrees that all Confidential Information received by Employee during Employee’s employment with the Company is, and shall be, the property of the Company exclusively. Employee agrees to immediately return to the Company (or, with the Company’s permission, destroy) all of the material mentioned above, including memoranda or notes taken by Employee and all tangible materials, including, without limitation, correspondence, drawings, blueprints, letters, notebooks, reports, flow-charts, computer programs and data proposals, at the request of the Company. No copies will be made by Employee, or retained by Employee, of any such Confidential Information, whether or not developed by Employee.

 

  (e) Third Party Information. Employee acknowledges that the Company may receive from third parties their confidential information subject to a duty on the Company’s part to maintain the confidentiality of such information and to use it only for certain limited purposes. Employee agrees that he owes the Company and such third parties, during the period of employment and thereafter, a duty to hold all such confidential information in the strictest confidence and not to disclose or use it, except as necessary to perform his obligations hereunder and as is consistent with the Company’s agreements with such third parties.

6. Intellectual Property; Assignment of Work Product. Employee shall assign and does hereby assign to the Key Companies, the entire right, title and interest (including, but not limited to, rights to prepare derivative works, adaptations and modifications) for the entire world in and to all work performed, writings, formulas, designs, models, drawings, recordings, photographs, design inventions and other inventions whether or not patentable, patents, copyrights, trade secrets, any other intellectual property rights, products, technology, and other proprietary rights made, conceived or reduced to practice or authorized by the Key Companies, either solely or jointly with others pursuant to or in connection with services rendered under this Agreement or with use of information, materials or facilities of the Key Companies received or used by Employee during the term of this Agreement. Employee agrees to sign, execute and acknowledge or cause to be signed, executed and acknowledged without cost, but at the expense of the Company, any and all documents and to perform such acts as may be necessary, useful or convenient for the purpose of securing to the Company, or its nominees, patent, trademark or copyright protection throughout the world upon all such writings, formulas, designs, models, drawings, recordings, photographs, and inventions, whether or not patentable, patents, copyrights, trade secrets, any other intellectual property rights, products, technology, and other proprietary rights, title to which the Company may acquire in accordance with the provisions of this clause. Employee shall not contest the validity of any invention, any copyright, any trademark, or any mask work registration owned by or vesting in the Key Companies under this Agreement.

 

Employment Agreement of                     

 

6


7. Consultation with Legal Counsel; Entire Agreement. Employee acknowledges and agrees that Employee has been provided a reasonable time to review this Agreement with legal counsel and to consider the terms and provisions of this Agreement. Both parties acknowledge and agree that they are voluntarily entering into this Agreement, after consultation with their legal counsel if so desired. This Agreement (together with any equity agreements pursuant to which equity is granted to Employee) contains the entire agreement between Employee and the Company and may not be amended except by written agreement of Employee and a duly authorized representative of the Company. This Agreement supersedes any and all prior agreements and understandings between Employee and the Company regarding any and all aspects of his employment relationship with the Company and any of its affiliates, whether written or oral [, except those terms provided for in the Offer Letter dated             , 2017 that are not addressed herein]. To the extent there is any conflict between this Agreement and the Offer Letter, the terms of this Agreement shall control. 

8. Withholding and Certain Tax Matters. Employee acknowledges and agrees that any or all payments under this Agreement may be subject to reduction for tax and other required withholdings.

 

  (a) Interpretation of Agreement. To the full extent possible, the terms of this Agreement shall be construed and administered so that no amount is includable in Employee’s gross income under Code Sec. 409A, and those sections of the Agreement relating to timing of payments shall be effective as of the Commencement Date of this Agreement.

 

  (b) Payment Schedule. Notwithstanding any provision of this Agreement, if the payment of any amount under this Agreement would cause an amount to be included in Employee’s gross income under Section 409A of the Internal Revenue Code because the timing of such payment is not delayed as provided in Section 409A(a) (2) (B) of the Internal Revenue Code, then any such payments that Employee would otherwise be entitled to during the first six months following the date of Employee’s separation from service shall be accumulated and paid on the date that is six months after the date of Employee’s termination of employment (or if such payment date does not fall on a business day of the Company, the next following business day of the Company), or such earlier date upon which such amount can be paid without causing any amount to be included in Employee’s gross income under Section 409A of the Internal Revenue Code.

 

  (c)

Tax Gross-up Payment. In the event that any amount arising from Section 4(d) of this Agreement is includable in Employee’s gross income under Code Sec. 409A as the result of the terms of this Agreement and/or the administration of those terms (the “Included Amount”), then the Company shall pay to Employee an amount equal to the 20% additional tax imposed under Code Sec. 409A on the Included Amount, together with any underpayment penalties and interest (the “Additional Tax”) resulting from the inclusion of the Included Amount. The Company also will pay Employee an additional amount necessary to “gross up” Employee for additional income taxes on the Additional Tax payment, on the earlier of (a) the

 

Employment Agreement of                     

 

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  thirtieth day following the date on which it is finally determined by a court or administrative agency that the Included Amount was includable, or (b) the last day of Employee’s taxable year following the taxable year in which Employee remitted the taxes due as the result of the application of Code Sec. 409A.

9. Governing Law. Any dispute concerning Employee’s employment or this Agreement will be governed and construed exclusively in accordance with the laws of Texas applicable to agreements made and performed entirely within such state, without giving effect to any choice or conflicts of laws principles, with venue of any dispute arising out of or related to this Agreement or to Employee’s employment exclusively found in Harris County, Texas.

10. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of and be enforceable by the successors and assigns of the parties hereto, which in his case shall include his estate, heirs, executors, administrators, personal and legal representatives, distributees, devisees, and legatees.

11. 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.

SIGNATURE PAGE FOLLOWS

 

Employment Agreement of                     

 

8


IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

 

KEY ENERGY SERVICES, LLC
By:  

/s/ Robert Drummond

  ROBERT DRUMMOND
  President and Chief Operating Officer

ACCEPTED AND AGREED:

 

 

[NAME]

[Title]

 

Employment Agreement of                     

 

9


EXHIBIT A

Definition of Change of Control of Key Energy Services, Inc.

“Change of Control” shall mean:

a. the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction or event (a “Business Combination”) involving the Company, which results in: (A) the holders of the Company’s voting securities immediately prior to the Business Combination no longer holding at least 60% of the total voting power of (x) the entity resulting from such Business Combination (the “Surviving Entity”) or (y) if applicable, the parent company that directly or indirectly has beneficial ownership of at least 95% of the voting power and (B) Platinum Equity Advisors, LLC and its affiliates no longer holding the ability to elect, directly or indirectly, (x) a majority of the members and (y) members holding a majority of the voting power, in each case, of the board of directors of the parent (or, if there is no parent, the Surviving Entity); or

b. the consummation of a sale of all or substantially all of the Company’s assets (other than to an affiliate of Platinum Equity Advisors, LLC); or

c. the stockholders of the Company approve a plan of complete dissolution or liquidation of the Company.

Notwithstanding the foregoing, a “Change of Control” shall not include any Chapter 11 proceeding except as otherwise provided in the joint prepackaged plan of reorganization of the Company and its debtor affiliates (the “Plan”) and any supplement to the Plan incorporated prior to confirmation of the Plan; and provided further, none of (1) the facts or circumstances giving rise to the commencement of, or occurring in connection with, the any case filed for the Company or its debtor affiliates under Chapter 11 of the bankruptcy code, (2) the issuance of shares of common stock of the Company reorganized pursuant to the Plan (“Reorganized Key”), or (3) implementation or consummation of any other transaction pursuant to the Plan shall constitute a “change in ownership” or “change of control” (or a change in working control) of any executory contract or other agreement (whether entered into before or after the date the Company files the Plan).

 

Employment Agreement of                     

 

10

EX-10.2

Exhibit 10.2

KEY ENERGY SERVICES, INC.

2016 EQUITY AND CASH INCENTIVE PLAN

TIME-VESTED RESTRICTED STOCK UNIT AWARD AGREEMENT

THIS TIME-VESTED RESTRICTED STOCK UNIT AWARD AGREEMENT, including the Appendix attached hereto (this “Agreement”), dated as of [•] (the “Date of Grant”), is made by and between Key Energy Services, Inc., a Delaware corporation (the “Company”), and [•] (the “Participant”).

R E C I T A L S:

WHEREAS, Awards of Time-Vested Restricted Stock Units (“Time-Vested Restricted Stock Units”) may be granted pursuant to the Key Energy Services, Inc. 2016 Equity and Cash Incentive Plan (the “Plan”);

[WHEREAS, in [December 2016] [January 2017] the Participant received equity awards pursuant to a Performance-based/Time-vested Option Award Agreement and a Performance-based/Time-vested Restricted Stock Unit Agreement (together, the “Prior Awards”);

WHEREAS, the Company has determined that the first tranche of the Prior Awards that is scheduled to vest during [December 2017] [and January 2018] shall be allowed to vest, if at all, pursuant to the terms and conditions of the original award agreements (the “December Vesting Awards”);

WHEREAS, the Company has determined that the Participant be given an election to continue to hold the Prior Awards that do not become vested with the December Vesting Awards, or to forfeit all rights to the Prior Awards other than the December Vesting Awards and receive this new award of Time-Vested Restricted Stock Units;

WHEREAS, the Participant has elected to forfeit all rights pursuant to the Prior Awards other than the December Vesting Awards and to receive the Time-Vested Restricted Stock Units granted pursuant to this Agreement (the “Participant Election”);

WHEREAS, by making the Participant Election the Participant has agreed that the vesting and settlement of the December Vesting Awards was in full satisfaction of the Prior Awards;]

WHEREAS, the Administrator has determined that it is in the best interests of the Company and its stockholders to grant the Time-Vested Restricted Stock Units (the “Restricted Stock Unit Award”) provided for herein pursuant to the terms of the Plan and subject to the further terms and conditions set forth herein; and

WHEREAS, the Participant desires to accept the Restricted Stock Unit Award made pursuant to this Agreement and agrees to abide by the restrictions that accompany this Agreement, including those set forth in Appendix A hereto.


NOW, THEREFORE, in consideration of the [Participant Election][services rendered by the Participant] and the mutual covenants hereinafter set forth, the parties hereto agree as follows:

 

1. Grant of Restricted Stock Units. The Company hereby grants to the Participant the Restricted Stock Unit Award consisting of [] Restricted Stock Units.

 

2. Incorporation by Reference. The provisions of the Plan are incorporated herein by reference. Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan and any capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan. The Administrator shall have the authority to interpret and construe the Plan and this Agreement and to make any and all determinations thereunder, and its decision shall be binding and conclusive upon the Participant and his or her legal representative in respect of any questions arising under the Plan or this Agreement.

 

3. Vesting of Restricted Stock Units. The Restricted Stock Units are restricted in that they are forfeitable and may not be sold, transferred or otherwise alienated or hypothecated (the “Restrictions”) until the Restricted Stock Units become vested and shares of Common Stock are delivered pursuant to Section 4 following removal or expiration of the Restrictions. Subject to (i) the Participant’s Continuous Service through the applicable Vesting Date (as defined below) and (ii) compliance with the terms and conditions of this Agreement (including without limitation, the restrictive covenants set forth in Appendix A), the Restrictions will expire and the Restricted Stock Units will become nonforfeitable and vested as to one-third (1/3) of the Restricted Stock Units on each anniversary of the Date of Grant (each, a “Vesting Date”).

 

4. Settlement.

 

  (a) Amount. The Company will deliver one share of Common Stock for each vested Restricted Stock Unit, less any withholding (as permitted pursuant to the Plan and Section 7 hereof). The value of any fractional Restricted Stock Unit shall be rounded down at the time shares of Common Stock are issued. No fractional shares of Common Stock, nor the cash value of any fractional shares of Common Stock, will be issuable or payable pursuant to this Agreement. The value of shares of Common Stock shall not bear any interest owing to the passage of time. Neither this Section 4 nor any action taken in accordance with this Section 4 shall be construed to create a trust or a funded or secured obligation of any kind.

 

  (b) Timing. Delivery in respect of the vested Restricted Stock Units will be made as soon as administratively practicable following the Vesting Date, but in no event more than sixty 60 days following the Vesting Date. Such delivery shall be subject to the Participant’s continued compliance with the restrictive covenants set forth in Appendix A.

 

5. Termination of Continuous Service. Subject to Section 6(b), or as may otherwise be determined by the Board in its discretion, all unvested Restricted Stock Units shall be forfeited upon termination of the Participant’s Continuous Service for any reason.

 

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6. Change of Control.

 

  (a) Notwithstanding Section 3, the Board may, in its sole discretion, accelerate the vesting of the Restricted Stock Units in connection with a Change of Control (as defined below).

 

  (b) Notwithstanding anything to the contrary in this Agreement, if the Participant’s Continuous Service is terminated (i) by the Company other than due to a Termination for Cause (as defined below) or (ii) by the Participant due to a Termination for Good Reason (as defined below), in each case within twelve (12) months following a Change of Control, (A) all unvested Restricted Stock Units shall vest and be settled in accordance with Section 4.

 

  (c) Change of Control” means:

 

  (i) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction or event (a “Business Combination”) involving the Company, which results in: (A) the holders of the Company’s voting securities immediately prior to the Business Combination no longer holding at least 60% of the total voting power of (x) the entity resulting from such Business Combination (the “Surviving Entity”) or (y) if applicable, the parent company that directly or indirectly has beneficial ownership of at least 95% of the voting power and (B) Platinum Equity Advisors, LLC and its affiliates no longer holding the ability to elect, directly or indirectly, (x) a majority of the members and (y) members holding a majority of the voting power, in each case, of the board of directors of the parent (or, if there is no parent, the Surviving Entity);

 

  (ii) the consummation of a sale of all or substantially all of the Company’s assets (other than to an affiliate of Platinum Equity Advisors, LLC); or

 

  (iii) the stockholders of the Company approve a plan of complete dissolution or liquidation of the Company.

Notwithstanding the foregoing, a “Change of Control” shall not include any Chapter 11 bankruptcy proceeding except as otherwise provided in the joint prepackaged plan of reorganization of the Company and its debtor affiliates filed on October 24, 2016 (the “Bankruptcy Plan”) and any supplement to the Bankruptcy Plan incorporated prior to confirmation of the Bankruptcy Plan; and provided, further, none of (a) the facts or circumstances giving rise to the commencement of, or occurring in connection with, any case filed for the Company or its debtor affiliates under Chapter 11 of the bankruptcy code, (b) the issuance of shares of common stock of the Company reorganized pursuant to the Bankruptcy Plan, or (c) implementation or consummation of any other transaction pursuant to the Bankruptcy Plan shall constitute a “Change of Control.”

 

3


  (d) Termination for Cause” means termination of the Participant’s employment by the Company (or any of its subsidiaries) by reason of the Participant’s (i) gross negligence in the performance of his or her duties, (ii) willful failure to perform his or her duties (other than such failure resulting from the Participant’s incapacity due to physical or mental illness) that the Participant fails to remedy to the reasonable satisfaction of the Company within thirty (30) days after written notice is delivered by the Company to the Participant that sets forth the basis of the Participant’s failure to perform his or her duties, (iii) willful engagement in conduct which is, or can reasonably be expected to be, materially injurious to the Company or its subsidiaries (monetarily or otherwise) or (iv) conviction of, or plea of guilty or no contest to, a misdemeanor involving moral turpitude or any felony.

 

  (e) Termination for Good Reason” means a resignation of employment with the Company (or its subsidiaries) following the occurrence of any of the following:

 

  (i) a material diminution in the Participant’s base salary (except in conjunction with an across-the-board base salary reduction that affects similarly situated employees of the Company), authority, duties or responsibilities from those in effect immediately prior to the date a Change of Control occurs;

 

  (ii) a move of more than fifty (50) miles in the geographic location at which the Participant must perform services from the location at which the Participant was required to perform services immediately prior to the date a Change of Control occurs; or

 

  (iii) any other action or inaction by the Company that constitutes a material breach of the Plan or this Agreement within one (1) year following a Change of Control.

In order for a resignation to be considered a Termination for Good Reason under this Agreement, (w) the event giving rise to Good Reason must have occurred without the Participant’s consent, (x) the Participant must provide notice to the Company of the existence of one of the above events within thirty (30) days of the initial existence of such condition, (y) the Company must be provided thirty (30) days from the date of the Participant’s notice to remedy that condition (the “Cure Period”), and (z) the condition must not have been remedied by the Company during the Cure Period.

 

7. Tax Withholding. The Company shall have the right to withhold from any delivery of Common Stock due under the Plan and this Agreement in accordance with and pursuant to Section 10.6 of the Plan.

 

8. No Rights as Stockholder. The Participant shall have no rights as a stockholder with respect to the shares of Common Stock underlying the Restricted Stock Units, nor shall the Participant have any rights to Dividend Equivalents with respect to the Restricted Stock Units, unless and until the Participant has become the record holder of such shares.

 

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9. Restrictive Covenants. The provisions of the attached Appendix A, which are deemed to be part of this Agreement as if fully set forth herein, shall apply to the Participant. By accepting this Agreement, the Participant agrees to be bound by, and promises to abide by, such provisions. The Participant further acknowledges and agrees that the restrictive covenants contained in Appendix A are reasonable and enforceable in all respects.

 

10. Detrimental Activity.

 

  (a) Upon delivery of Common Stock in respect of vested Restricted Stock Units, the Participant shall certify in a manner acceptable to the Company that the Participant has not engaged in any Detrimental Activity (as defined below).

 

  (b) The Administrator may cancel, rescind, suspend, withhold or otherwise limit or restrict this Restricted Stock Unit Award, in whole or in part, at any time if the Participant engages in any Detrimental Activity.

 

  (c) In the event a Participant engages in Detrimental Activity after delivery of Common Stock in respect of vested Restricted Stock Units and during any period for which any restrictive covenant prohibiting such activity is applicable to the Participant, such delivery may be rescinded within one (1) year after the Participant engages in such Detrimental Activity. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the delivery, in such manner and on such terms and conditions as may be required by the Company. The Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company, subject to compliance with Section 409A of the Code, if applicable.

 

  (d) Detrimental Activity” means (i) any violation of the terms of any written agreement (including this Agreement, an Award Agreement, employment agreement or other agreement) with the Company or any of its Affiliates relating to covenants with respect to non-disclosure, confidentiality, intellectual property, work product, inventions assignment, privacy, exclusivity, non-competition, non-solicitation or non-disparagement; (ii) breach of the Company’s Code of Business Conduct; (iii) activity that is discovered to be grounds for or results in the Participant’s Termination for Cause; (iv) the conviction of, or guilty plea entered by, the Participant for any felony or a crime involving moral turpitude whether or not connected with the Company or its Affiliates; or (v) the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or any of its Affiliates.

 

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11. Compliance with Laws, Regulations and Company Policies. The grant and payment of the Restricted Stock Units shall be subject to compliance by the Company and the Participant with all applicable requirements of state and federal laws and regulatory agencies and with all applicable requirements of any stock exchange on which the Common Stock may be listed at the time of such issuance or transfer, if applicable. This Restricted Stock Unit Award shall also be subject to any applicable clawback or recoupment policies, share trading and stock ownership policies of the Company, and other policies that may be implemented by the Board from time to time.

 

12. Section 409A. Any amounts payable with respect to the Restricted Stock Units are intended to be exempt from Section 409A of the Code in reliance on the short-term deferral exemption set forth in the final regulations issued thereunder. If any amounts payable with respect to the Restricted Stock Units are determined to be subject to Section 409A of the Code, such payments may only be made under this Agreement upon an event and in a manner permitted by Section 409A of the Code. All payments to be made upon a termination of employment may only be made upon a “separation from service” under Section 409A of the Code. For purposes of Section 409A of the Code, each payment shall be treated as a separate payment. In no event may the Participant, directly or indirectly, designate the calendar year in which the payments under this Agreement will be made. Notwithstanding anything in this Agreement to the contrary, if the Participant is a “specified employee” as defined by Section 409A of the Code, then if and to the extent required by Section 409A of the Code, any payment with respect to the Restricted Stock Units upon a separation from service will not be made before the date that is six (6) months after the Participant separates from service or such earlier date permitted by Section 409A of the Code.

 

13. No Right to Continuous Service. Nothing herein alters the at-will nature of the Participant’s employment with the Company or any of its subsidiaries. Nothing in this Agreement shall be deemed by implication or otherwise to impose any limitation on any right of the Company or any of its Affiliates to terminate the Participant’s Continuous Service at any time.

 

14. Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first class mail, return receipt requested, facsimile transmission, courier service or personal delivery:

If to the Company:

Key Energy Services, Inc.

1301 McKinney Street, Suite 1800

Houston, Texas 77010

Facsimile: 713-651-4559

Attention: General Counsel

If to the Participant:

At the address on file with the Company

All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied.

 

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15. Bound by Plan. By accepting this Agreement, the Participant acknowledges that he or she has received a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all of the terms and provisions of the Plan.

 

16. Beneficiary. The Participant may file with the Administrator a written designation of a beneficiary on such form as may be prescribed by the Administrator and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Participant, the legal representative of the Participant’s estate shall be deemed to be the Participant’s beneficiary.

 

17. Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and on the Participant and the Participant’s executors, administrators, heirs, and successors.

 

18. Amendment of Restricted Stock Unit Award. Subject to Section 19 of this Agreement and subject to the terms of the Plan, the Administrator at any time and from time to time may amend the terms of this Restricted Stock Unit Award; provided, however, that the Participant’s rights under this Restricted Stock Unit Award shall not be impaired by any such amendment unless the Company requests the Participant’s consent and the Participant consents in writing, or except as otherwise permitted under the Plan.

 

19. Adjustment Upon Changes in Capitalization. The shares of Common Stock underlying the Restricted Stock Units may be adjusted as provided in the Plan including, without limitation, Section 11 of the Plan. The Participant, by accepting this Agreement, irrevocably and unconditionally consents and agrees to any such adjustments as may be made at any time hereafter.

 

20. Governing Law and Venue. The provisions of this Agreement shall be construed and enforced in accordance with the laws and decisions of the State of Delaware, without regard to such state’s conflict of law principles. Any dispute or conflict between the parties shall be brought in a state or federal court located in Wilmington, Delaware. The parties hereto submit to jurisdiction and venue in Wilmington, Delaware and all objections to such venue and jurisdiction are hereby waived.

 

21. Severability. If any provision of this Agreement or any part of any provision of this Agreement is determined to be unenforceable for any reason whatsoever, it shall be severable from the rest of the Agreement and shall not invalidate or affect the other portions or parts of this Agreement, which shall remain in full force and effect. Furthermore, each covenant contained in this Agreement shall stand independently and be enforceable without regard to any other covenants or to any other provisions of this Agreement.

 

22. Waiver. The waiver by the Company of a breach of any provision contained in this Agreement shall not operate or be construed as a waiver of any subsequent breach or as a waiver of any other provisions of this Agreement.

 

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23. Headings. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part of this Agreement.

 

24. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one instrument. Delivery of an executed counterpart of this Agreement by facsimile or portable document format (.pdf) attachment to electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement.

 

25. No Liability for Good Faith Determinations. The Company and the members of the Board shall not be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Time-Vested Restricted Stock Units granted hereunder.

 

26. Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in paper format, the Participant agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Company may be required to deliver (including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports and all other forms of communications) in connection with this and any other award made or offered by the Company. Electronic delivery may be via a Company electronic mail system or by reference to a location on a Company intranet to which the Participant has access. The Participant hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may be required to deliver, and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.

[Signature Page Follows]

 

8


IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Agreement effective as of the Date of Grant set forth above.

 

KEY ENERGY SERVICES, INC.
By:  

/s/ Scott P. Miller

Name:   Scott P. Miller
Title:   Senior Vice President, Operations Services and Chief Administrative Officer

The Participant (a) acknowledges receipt of the Plan incorporated herein, (b) confirms that the prospectus for the Plan has been made available to the Participant, (c) acknowledges that he or she has read this Agreement, the Plan and the Plan prospectus and understands the terms and conditions of them, (d) accepts the Restricted Stock Unit Award, (e) agrees to be bound by, and comply with, the terms of the Plan and this Agreement, including the restrictive covenants contained in Appendix A, and (f) agrees that all decisions and determinations of the Administrator with respect to the Restricted Stock Unit Award shall be final and binding on the Participant and any other person having or claiming an interest under the Restricted Stock Unit Award.

The Participant named below hereby accepts the terms of this Agreement and the Plan.

 

 

[NAME]
[ADDRESS]

 

EMPLOYEE ID NUMBER: []

 

Signature Page


APPENDIX A

PROTECTION OF INFORMATION; NON-COMPETITION; NON-SOLICITATION

1. Non-Disclosure of Confidential Information. In the course of the Participant’s employment with the Company or any of the Company’s direct or indirect subsidiaries (collectively, “subsidiaries” or each a “subsidiary”), and the performance of the Participant’s duties on behalf of the Company or any of its subsidiaries, the Participant will be provided with, and will have access to Confidential Information (as defined below). In consideration, and as a condition, of the Participant’s receipt of and access to Confidential Information, and as a condition of the Company’s entry into this Agreement, the Participant, both during the course of the Participant’s employment with the Company or any of its subsidiaries and thereafter, shall not disclose any Confidential Information to any person or entity and shall not use any Confidential Information except for the benefit of the Company or its subsidiaries or with the express written consent of the Chief Executive Officer or the General Counsel of the Company. The Participant shall follow all Company policies and protocols regarding the security of all documents and other material containing Confidential Information (regardless of the medium on which such Confidential Information is stored). This Section 1 shall apply to all Confidential Information, whether known or later to become known to the Participant during the period that the Participant is employed or affiliated with the Company or any of its subsidiaries.

2. Permitted Disclosures. Notwithstanding the foregoing, or any other provision of this Agreement or the Plan:

 

  a. the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is: (i) made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (B) solely for the purpose of reporting or investigating a suspected violation of law; (ii) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or (iii) protected under the whistleblower provisions of applicable law;

 

  b. in the event the Participant files a lawsuit for retaliation by the Company or any of its subsidiaries for the Participant’s reporting of a suspected violation of law, the Participant may (i) disclose a trade secret to the Participant’s attorney and (ii) use the trade secret information in the court proceeding related to such lawsuit, in each case, if the Participant (A) files any document containing such trade secret under seal; and (B) does not otherwise disclose such trade secret, except pursuant to court order; and

 

  c. nothing shall prevent the Participant from lawfully, and without obtaining prior authorization from the Company or any of its subsidiaries, (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by the U.S. Securities and Exchange Commission (the “SEC”) or any other governmental or regulatory agency, entity, or official(s) (collectively, “Governmental Authorities”) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to an employee individually from any Governmental Authority; (iii) testifying, participating or

 

i


  otherwise assisting in an action or proceeding by any Governmental Authorities relating to a possible violation of law, including providing documents or other confidential information to Governmental Authorities; or (iv) receiving an award for information provided to the SEC or any other Governmental Authority. Neither the Plan nor this Agreement (nor any other agreement between the Participant and the Company or a subsidiary of the Company) shall be construed or applied to require the Participant to obtain prior authorization from the Company or any of its subsidiaries before engaging in any of the foregoing conduct referenced in this Section 2, or to notify the Company or any of its subsidiaries of having engaged in any such conduct.

3. Definition of Confidential Information. As used herein, “Confidential Information” means all non-public or proprietary information of, or related to, the Company or any of its subsidiaries, including, without limitation, all designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that (i) are acquired by or disclosed to the Participant during the period that the Participant is or has been employed or affiliated with the Company or any of its subsidiaries (whether acquired or disclosed during business hours or otherwise and whether acquired or disclosed on the Company’s premises or otherwise) or (ii) relate to the businesses or properties, products or services of the Company or any of its subsidiaries (including all such information relating to technical information, including engineering and scientific research, development, methodology, devices and processes; formulas and chemical compositions; blueprints, designs and drawings; financial information, budgets, projections and results; business and marketing plans, strategies, and programs; employee and contractor lists and records; business methods, and operating and production procedures; pricing, sales data, prospect and customer lists and information; supplier and vendor lists and information; terms of commercial contracts, as well as all such information relating to corporate opportunities, operations, future plans, methods of doing business, business plans, strategies for developing business and market share, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or acquisition targets or their requirements, the identity of key contacts within customers’ organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names and marks). Moreover, all documents, presentations, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, e-mail, voice mail, electronic databases, maps, data, models and all other writings or materials of any type including or embodying any Confidential Information shall be the sole and exclusive property of the Company or any of its subsidiaries and is subject to the same restrictions on disclosure applicable to all Confidential Information as set forth above. Confidential Information does not include any information that is or becomes generally available to the public other than as a result of a disclosure or wrongful act of the Participant or any of the Participant’s agents.

4. Non-Competition; Non-Solicitation.

 

  a.

In granting the Restricted Stock Unit Award to the Participant, the Company provides the Participant a further incentive to build the Company’s goodwill and links the Participant’s interests to the Company’s long-term business interests. As an inducement for the Company to grant the Restricted Stock Unit Award and enter into this Agreement, and in order to protect the Confidential Information, and the Company’s and its

 

ii


  subsidiaries goodwill, the Participant voluntarily agrees to the covenants set forth in this Section 4(a). The Participant agrees and acknowledges that the limitations and restrictions set forth herein, including the geographical and temporal restrictions on certain activities, are reasonable in all respects and not oppressive and are material and substantial part of the Company’s willingness to enter into this Agreement, and are intended and necessary to protect the Company’s and its subsidiaries’ Confidential Information, goodwill, and substantial and legitimate business interests.

 

  b. The Participant agrees that during the Prohibited Period, the Participant shall not, without prior written approval of the Company, directly or indirectly, for the Participant, or on behalf of or in conjunction with any other person or entity of whatever nature:

 

  i. engage in or carry on within the Market Area in competition with the Company or any of its subsidiaries in any aspect of the Business, which prohibition shall prevent the Participant from directly or indirectly: (A) owning, managing, operating, becoming an officer or director of any person or entity engaged in, or planning to engage in, the Business in the Market Area in competition, or anticipated competition, with the Company or any of its subsidiaries, or (B) in the Market Area, joining, becoming employee or consultant of, or otherwise being affiliated with any person or entity engaged in, or planning to engage in, the Business in the Market Area in competition, or anticipated competition, with the Company or any of its subsidiaries (in each case, with respect to this clause (B), in any capacity in which the Participant’s duties are the same or similar to those performed for the Company or any of its subsidiaries);

 

  ii. appropriate any Business Opportunity of, or relating to, the Company or any of its subsidiaries located in the Market Area;

 

  iii. within the Market Area, solicit, canvass, approach, encourage, entice or induce any customer or supplier of the Company or any of its subsidiaries with whom or which the Participant had contact in the last 24 months of his or her employment with the Company or its subsidiaries or about whom or which the Participant obtained Confidential Information to cease or lessen such customer’s or supplier’s business with the Company or any of its subsidiaries in the Business; or

 

  iv. solicit, canvass, approach, encourage, entice or induce any employee or contractor of the Company or any of its subsidiaries to terminate his, her or its employment or engagement therewith, excluding general advertisements and solicitations not targeted at the employees or contractors of the Company or its subsidiaries.

 

  v.

Notwithstanding the above-referenced limitations in Sections 4(b)(i), 4(b)(ii) and 4(b)(iii), such limitations shall not apply following the termination of the Participant’s employment with the Company and (as applicable) any of its subsidiaries in those portions of the Market Area located within the State of Oklahoma. Instead, the Participant agrees that, during the portion of the Prohibited Period that occurs after the Participant is no longer employed by the Company or any of its subsidiaries, the restrictions on the Participant’s activities

 

iii


  within those portions of the Market Area located within the State of Oklahoma (in addition to those restrictions set forth in Sections 1 and 4(b)(iv) herein) shall be as follows: the Participant will not directly or indirectly solicit the sale of goods, services, or a combination of goods and services from the established customers of the Company or of any of its subsidiaries.

 

  c. For purposes of this Section 4, the following terms shall have the following meanings:

 

  i. Business” means the business and operations that are the same or similar to those performed by the Company or any of its subsidiaries and for which the Participant obtained Confidential Information or had direct or indirect responsibilities during the period of the Participant’s employment with the Company or any of its subsidiaries, which business and operations include (if Participant obtained Confidential Information or had direct or indirect responsibilities with respect to such business and operations on behalf of the Company or any of its subsidiaries during the period of his or her employment): rig-based and coiled tubing-based well maintenance and workover services, well completion and recompletion services, fluid management services, and fishing and rental services.

 

  ii. Business Opportunity” shall mean any commercial, investment or other business opportunity relating to the Business.

 

  iii. Market Area” means: (a) each county in which the Participant was based or performed material services on behalf of the Company or any of its subsidiaries; and (b) each of the following basins and oil and gas shale plays: Bakken, Barnett, Denver-Julesberg, Eagle Ford, Fayetteville, Granite Wash, Haynesville, Marcellus, Mississippi Lime, Niobrara, Permian, Powder River, SCOOP, STACK, Tuscaloosa, Williston, and Woodford; provided, however, a basin or play shall not be included within the Market Area if: (1) the Participant had no direct or indirect responsibilities with respect to such basin or play during the last 24 months of the Participant’s employment or engagement with the Company or any of its subsidiaries, or (2) the Participant obtained no Confidential Information with respect the Company’s or any of its subsidiaries’ Business in such basin or play.

 

  iv. Prohibited Period” shall mean the period during which the Participant is employed by the Company or any of its subsidiaries and continuing for a period of twelve (12) months following the date that the Participant is no longer employed by the Company or any of its subsidiaries.

5. Return of Confidential Information. Upon the termination of the Participant’s employment with the Company or any of its subsidiaries, and at any other time upon request of the Company, the Participant shall promptly surrender and deliver to the Company all documents (including electronically stored information) and all copies thereof and all other materials of any nature containing or pertaining to all Confidential Information (including any Company-issued computer, mobile devise or other equipment) in the Participant’s possession, custody or control and the Participant shall not retain any such document or other materials or property.

 

iv


6. Specific Performance. Because of the difficulty of measuring economic losses to the Company and its subsidiaries as a result of a breach of the foregoing covenants, and because of the immediate and irreparable damage that would be caused to the Company and its subsidiaries for which it would have no other adequate remedy, the Participant agrees that the Company and each of its subsidiaries shall be entitled to enforce the foregoing covenants, in the event of a breach, by injunctions and restraining orders and that such enforcement shall not be the Company’s or its subsidiaries’ exclusive remedy for a breach but instead shall be in addition to all other rights and remedies available to the Company and its subsidiaries, at law and equity.

7. Severability. The covenants in this Appendix A to the Agreement are severable and separate, and the unenforceability of any specific covenant (or any portion thereof) shall not affect the provisions of any other covenant (or portion thereof). Moreover, in the event any arbitrator or court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the Participant and the Company that such restrictions be enforced to the fullest extent which the arbitrator deems reasonable and this Agreement shall thereby be reformed.

8. Third-Party Beneficiaries. Each of the Company’s subsidiaries that is not a signatory hereto shall be a third-party beneficiary of the Participant’s representations, covenants and obligations set forth in this Appendix A and shall be entitled to enforce such representations, covenants and obligations as if a party hereto.

 

v

EX-10.3

Exhibit 10.3

KEY ENERGY SERVICES, INC.

2016 EQUITY AND CASH INCENTIVE PLAN

PERFORMANCE-BASED

RESTRICTED STOCK UNIT AWARD AGREEMENT

THIS PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT, including the Appendix attached hereto (this “Agreement”), dated as of [•] (the “Date of Grant”), is made by and between Key Energy Services, Inc., a Delaware corporation (the “Company”), and [•] (the “Participant”).

R E C I T A L S:

WHEREAS, Awards of Restricted Stock Units intended to qualify as Performance Compensation Awards (“Performance-Based Restricted Stock Units”), may be granted pursuant to the Key Energy Services, Inc. 2016 Equity and Cash Incentive Plan (the “Plan”);

[WHEREAS, in [December 2016] [January 2017] the Participant received equity awards pursuant to a Performance-based/Time-vested Option Award Agreement and a Performance-based/Time-vested Restricted Stock Unit Agreement (together, the “Prior Awards”);

WHEREAS, the Company has determined that the first tranche of the Prior Awards that is scheduled to vest during [December 2017] [and January 2018] shall be allowed to vest, if at all, pursuant to the terms and conditions of the original award agreements (the “December Vesting Awards”);

WHEREAS, the Company has determined that the Participant be given an election to continue to hold the Prior Awards that do not become vested with the December Vesting Awards, or to forfeit all rights to the Prior Awards other than the December Vesting Awards and receive this new award of Performance-Based Restricted Stock Units;

WHEREAS, the Participant has elected to forfeit all rights pursuant to the Prior Awards other than the December Vesting Awards and to receive the Performance-Based Restricted Stock Units granted pursuant to this Agreement (the “Participant Election”);

WHEREAS, by making the Participant Election the Participant has agreed that the vesting and settlement of the December Vesting Awards was in full satisfaction of the Prior Awards;]

WHEREAS, the Administrator has determined that it is in the best interests of the Company and its stockholders to grant the Performance-Based Restricted Stock Units (the “Performance-Based Restricted Stock Unit Award”) provided for herein pursuant to the terms of the Plan and subject to the further terms and conditions set forth herein; and

WHEREAS, the Participant desires to accept the Performance-Based Restricted Stock Unit Award made pursuant to this Agreement and agrees to abide by the restricts that accompany this Agreement, including those set forth in Appendix A hereto.


NOW, THEREFORE, in consideration of the [Participant Election and the mutual covenants hereinafter set forth, the parties hereto agree as follows:

 

1. Grant of Performance-Based Restricted Stock Units. The Company hereby grants to the Participant the Performance-Based Restricted Stock Unit Award consisting of [•] Performance-Based Restricted Stock Units. The number of Performance-Based Restricted Stock Units that the Participant will actually earn will be determined as set forth in Section 3 hereof.

 

2. Incorporation by Reference. The provisions of the Plan are incorporated herein by reference. Except as otherwise expressly set forth herein, this Agreement shall be construed in accordance with the provisions of the Plan and any capitalized terms not otherwise defined in this Agreement shall have the definitions set forth in the Plan. The Administrator shall have the authority to interpret and construe the Plan and this Agreement and to make any and all determinations thereunder, and its decision shall be binding and conclusive upon the Participant and his or her legal representative in respect of any questions arising under the Plan or this Agreement.

 

3. Vesting of Performance-Based Restricted Stock Units. Subject to (i) the Participant’s Continued Service through the last day of the 2020 Performance Period (as defined below) and (ii) compliance with the terms and conditions of this Agreement (including without limitation, the restrictive covenants set forth in Appendix A), the Performance-Based Restricted Stock Units shall be earned and vested following the end of the 2020 Performance Period (as defined below). One-third of the target number of Performance-based Restricted Stock Units granted in Section 1 will be assigned to each individual Performance Period, with the actual number of Performance-Based Restricted Stock Units in each tranche that will become earned and vested during that Performance Period to be determined based on the Company’s level of adjusted non-capitalized EBITDA (as defined below) generated (the “Performance Goal”) during the applicable performance periods set forth below (each a “Performance Period”). As used herein, “EBITDA” means Company adjusted non-capitalized earnings before interest, taxes, depreciation and amortization.

 

  (a) Performance Periods.

 

Fiscal Year

   EBITDA Threshold
($M)
(0.5x Payout)
     EBITDA Target
($M)
(1.0x Payout)
     EBITDA Stretch
($M)
(1.5x Payout)
     EBITDA Maximum
($M)
(2.0x Payout)
 

2018

   $ 32.8      $ 41.0      $ 51.3      $ 61.5  

2019

   $ 64.0      $ 80.0      $ 100.0      $ 120.0  

2020

   $ 80.0      $ 100.0      $ 125.0      $ 150.0  

 

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  (b) Certification. Following completion of each Performance Period, the Administrator shall review and certify in writing the level of performance achieved with respect to the Performance Goal for such Performance Period. In the event that EBITDA performance was reached in between any of the levels set forth in Section 3(a), the number of Performance-Based Restricted Stock Units that will be deemed earned and vested for that tranche will be interpolated on a linear basis. At the end of the 2020 Performance Period, the Administrator shall review the number of Performance-Based Restricted Stock Units in each tranche that were deemed to have been earned and vested to determine the aggregate number of Performance-based Restricted Stock Units that have become earned and vested pursuant to this Agreement.

 

4. Settlement.

 

  (a) Amount. The Company will deliver one share of Common Stock for each vested Performance-Based Restricted Stock Unit, less any withholding (as permitted pursuant to the Plan and Section 7 hereof). The value of any fractional Performance-Based Restricted Stock Unit shall be rounded down at the time shares of Common Stock are issued. No fractional shares of Common Stock, nor the cash value of any fractional shares of Common Stock, will be issuable or payable pursuant to this Agreement. The value of shares of Common Stock shall not bear any interest owing to the passage of time. Neither this Section 4 nor any action taken in accordance with this Section 4 shall be construed to create a trust or a funded or secured obligation of any kind.

 

  (b) Timing. Delivery in respect of the vested Performance-Based Restricted Stock Units will be made as soon as administratively practicable following completion of the certification required by Section 3(b) above with respect to the 2020 Performance Period, and in any event within sixty (60) days following the end of the 2020 Performance Period. Such delivery shall be subject to the Participant’s continued compliance with the restrictive covenants set forth in Appendix A.

 

5. Termination of Continuous Service. Subject to Section 6(b), or as may otherwise be determined by the Board in its discretion, all unvested Performance-Based Restricted Stock Units shall be forfeited upon termination of the Participant’s Continuous Service for any reason.

 

6. Change of Control.

 

  (a) Notwithstanding Section 3, the Board may, in its sole discretion, accelerate the vesting of the Performance-Based Restricted Stock Units in connection with a Change of Control (as defined below).

 

  (b) Notwithstanding anything to the contrary in this Agreement, if the Participant’s Continuous Service is terminated (i) by the Company other than due to a Termination for Cause (as defined below) or (ii) by the Participant due to a Termination for Good Reason (as defined below), in each case within twelve (12) months following a Change of Control, the Board may determine, in its sole discretion, to accelerate the vesting of any unvested Performance-Based Restricted Stock Units, which determination shall be made prior to the Change of Control, and if accelerated, shall be settled in accordance with Section 4.

 

-3-


  (c) Change of Control” means:

 

  (i) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction or event (a “Business Combination”) involving the Company, which results in: (A) the holders of the Company’s voting securities immediately prior to the Business Combination no longer holding at least 60% of the total voting power of (x) the entity resulting from such Business Combination (the “Surviving Entity”) or (y) if applicable, the parent company that directly or indirectly has beneficial ownership of at least 95% of the voting power and (B) Platinum Equity Advisors, LLC and its affiliates no longer holding the ability to elect, directly or indirectly, (x) a majority of the members and (y) members holding a majority of the voting power, in each case, of the board of directors of the parent (or, if there is no parent, the Surviving Entity);

 

  (ii) the consummation of a sale of all or substantially all of the Company’s assets (other than to an affiliate of Platinum Equity Advisors, LLC); or

 

  (iii) the stockholders of the Company approve a plan of complete dissolution or liquidation of the Company.

Notwithstanding the foregoing, a “Change of Control” shall not include any Chapter 11 bankruptcy proceeding except as otherwise provided in the joint prepackaged plan of reorganization of the Company and its debtor affiliates filed on October 24, 2016 (the “Bankruptcy Plan”) and any supplement to the Bankruptcy Plan incorporated prior to confirmation of the Bankruptcy Plan; and provided, further, none of (a) the facts or circumstances giving rise to the commencement of, or occurring in connection with, any case filed for the Company or its debtor affiliates under Chapter 11 of the bankruptcy code, (b) the issuance of shares of common stock of the Company reorganized pursuant to the Bankruptcy Plan, or (c) implementation or consummation of any other transaction pursuant to the Bankruptcy Plan shall constitute a “Change of Control.”

 

  (d) Termination for Cause” means termination of the Participant’s employment by the Company (or any of its subsidiaries) by reason of the Participant’s (i) gross negligence in the performance of his or her duties, (ii) willful failure to perform his or her duties (other than such failure resulting from the Participant’s incapacity due to physical or mental illness) that the Participant fails to remedy to the reasonable satisfaction of the Company within thirty (30) days after written notice is delivered by the Company to the Participant that sets the basis of the Participant’s failure to perform his or her duties, (iii) willful engagement in conduct which is, or can reasonably be expected to be, materially injurious to the Company or its subsidiaries (monetarily or otherwise) or (iv) conviction of, or plea of guilty or no contest to, a misdemeanor involving moral turpitude or any felony.

 

-4-


  (e) Termination for Good Reason” means a resignation of employment with the Company (or its subsidiaries) following the occurrence of any of the following:

 

  (i) a material diminution in the Participant’s base salary (except in conjunction with an across-the-board base salary reduction that affects similarly situated employees of the Company), authority, duties or responsibilities from those in effect immediately prior to the date a Change of Control occurs;

 

  (ii) a move of more than fifty (50) miles in the geographic location at which the Participant must perform services from the location at which the Participant was required to perform services immediately prior to the date a Change of Control occurs; or

 

  (iii) any other action or inaction by the Company that constitutes a material breach of the Plan or this Agreement within one (1) year following a Change of Control.

In order for a resignation to be considered a Termination for Good Reason under this Agreement, (w) the event giving rise to Good Reason must have occurred without the Participant’s consent, (x) the Participant must provide notice to the Company of the existence of one of the above events within thirty (30) days of the initial existence of such condition, (y) the Company must be provided thirty (30) days from the date of the Participant’s notice to remedy that condition (the “Cure Period”), and (z) the condition must not have been remedied by the Company during the Cure Period.

 

7. Tax Withholding. The Company shall have the right to withhold from any delivery of Common Stock due under the Plan and this Agreement in accordance with and pursuant to Section 10.6 of the Plan.

 

8. No Rights as Stockholder. The Participant shall have no rights as a stockholder with respect to the shares of Common Stock underlying the Performance-Based Restricted Stock Units, nor shall the Participant have any rights to Dividend Equivalents with respect to the Performance-Based Restricted Stock Units, unless and until the Participant has become the record holder of such shares.

 

9. Restrictive Covenants. The provisions of the attached Appendix A, which are deemed to be part of this Agreement as if fully set forth herein, shall apply to the Participant. By accepting this Agreement, the Participant agrees to be bound by, and promises to abide by, such provisions. The Participant further acknowledges and agrees that the restrictive covenants contained in Appendix A are reasonable and enforceable in all respects.

 

-5-


10. Detrimental Activity.

 

  (a) Upon delivery of Common Stock in respect of vested Performance-Based Restricted Stock Units, the Participant shall certify in a manner acceptable to the Company that the Participant has not engaged in any Detrimental Activity (as defined below).

 

  (b) The Administrator may cancel, rescind, suspend, withhold or otherwise limit or restrict this Performance-Based Restricted Stock Unit Award, in whole or in part, at any time if the Participant engages in any Detrimental Activity.

 

  (c) In the event a Participant engages in Detrimental Activity after delivery of Common Stock in respect of vested Performance-Based Restricted Stock Units and during any period for which any restrictive covenant prohibiting such activity is applicable to the Participant, such delivery may be rescinded within one (1) year after the Participant engages in such Detrimental Activity. In the event of any such rescission, the Participant shall pay to the Company the amount of any gain realized or payment received as a result of the delivery, in such manner and on such terms and conditions as may be required by the Company. The Company shall be entitled to set-off against the amount of any such gain any amount owed to the Participant by the Company, subject to compliance with Section 409A of the Code, if applicable.

 

  (d) Detrimental Activity” means (i) any violation of the terms of any written agreement (including this Agreement, an Award Agreement, employment agreement or other agreement) with the Company or any of its Affiliates relating to covenants with respect to non-disclosure, confidentiality, intellectual property, work product, inventions assignment, privacy, exclusivity, non-competition, non-solicitation or non-disparagement; (ii) breach of the Company’s Code of Business Conduct; (iii) activity that is discovered to be grounds for or results in the Participant’s Termination for Cause; (iv) the conviction of, or guilty plea entered by, the Participant for any felony or a crime involving moral turpitude whether or not connected with the Company or its Affiliates; or (v) the commission of any other act involving willful malfeasance or material fiduciary breach with respect to the Company or any of its Affiliates.

 

11. Compliance with Laws, Regulations and Company Policies. The grant and payment of the Performance-Based Restricted Stock Units shall be subject to compliance by the Company and the Participant with all applicable requirements of state and federal laws and regulatory agencies and with all applicable requirements of any stock exchange on which the Common Stock may be listed at the time of such issuance or transfer, if applicable. This Performance-Based Restricted Stock Unit Award shall also be subject to any applicable clawback or recoupment policies, share trading and stock ownership policies of the Company, and other policies that may be implemented by the Board from time to time.

 

-6-


12. Section 409A. Any amounts payable with respect to the Performance-Based Restricted Stock Units are intended to be exempt from Section 409A of the Code in reliance on the short-term deferral exemption set forth in the final regulations issued thereunder. If any amounts payable with respect to the Performance-Based Restricted Stock Units are determined to be subject to Section 409A of the Code, such payments may only be made under this Agreement upon an event and in a manner permitted by Section 409A of the Code. All payments to be made upon a termination of employment may only be made upon a “separation from service” under Section 409A of the Code. For purposes of Section 409A of the Code, each payment shall be treated as a separate payment. In no event may the Participant, directly or indirectly, designate the calendar year in which the payments under this Agreement will be made. Notwithstanding anything in this Agreement to the contrary, if the Participant is a “specified employee” as defined by Section 409A of the Code, then if and to the extent required by Section 409A of the Code, any payment with respect to the Performance-Based Restricted Stock Units upon a separation from service will not be made be made before the date that is six (6) months after the Participant separates from service or such earlier date permitted by Section 409A of the Code.

 

13. No Right to Continuous Service. Nothing herein alters the at-will nature of the Participant’s employment with the Company or any of its subsidiaries. Nothing in this Agreement shall be deemed by implication or otherwise to impose any limitation on any right of the Company or any of its Affiliates to terminate the Participant’s Continuous Service at any time.

 

14. Notices. All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first class mail, return receipt requested, facsimile transmission, courier service or personal delivery:

If to the Company:

Key Energy Services, Inc.

1301 McKinney Street, Suite 1800

Houston, Texas 77010

Facsimile: 713-651-4559

Attention: General Counsel

If to the Participant:

At the address on file with the Company

All such notices, demands and other communications shall be deemed to have been duly given when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial courier service; five (5) business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is mechanically acknowledged, if telecopied.

 

-7-


15. Bound by Plan. By accepting this Agreement, the Participant acknowledges that he or she has received a copy of the Plan and has had an opportunity to review the Plan and agrees to be bound by all of the terms and provisions of the Plan.

 

16. Beneficiary. The Participant may file with the Administrator a written designation of a beneficiary on such form as may be prescribed by the Administrator and may, from time to time, amend or revoke such designation. If no designated beneficiary survives the Participant, the legal representative of the Participant’s estate shall be deemed to be the Participant’s beneficiary.

 

17. Successors. The terms of this Agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns, and on the Participant and the Participant’s executors, administrators, heirs, and successors.

 

18. Amendment of Performance-Based Restricted Stock Unit Award. Subject to Section 19 of this Agreement and subject to the terms of the Plan, the Administrator at any time and from time to time may amend the terms of this Performance-Based Restricted Stock Unit Award; provided, however, that the Participant’s rights under this Performance-Based Restricted Stock Unit Award shall not be impaired by any such amendment unless the Company requests the Participant’s consent and the Participant consents in writing, or except as otherwise permitted under the Plan.

 

19. Adjustment Upon Changes in Capitalization. The shares of Common Stock underlying the Performance-Based Restricted Stock Units [and the Performance Goal] may be adjusted as provided in the Plan including, without limitation, Section 11 and Section 2.37 of the Plan. The Participant, by accepting this Agreement, irrevocably and unconditionally consents and agrees to any such adjustments as may be made at any time hereafter.

 

20. Governing Law and Venue. The provisions of this Agreement shall be construed and enforced in accordance with the laws and decisions of the State of Delaware, without regard to such state’s conflict of law principles. Any dispute or conflict between the parties shall be brought in a state or federal court located in Wilmington, Delaware. The parties hereto submit to jurisdiction and venue in Wilmington, Delaware and all objections to such venue and jurisdiction are hereby waived.

 

21. Severability. If any provision of this Agreement or any part of any provision of this Agreement is determined to be unenforceable for any reason whatsoever, it shall be severable from the rest of the Agreement and shall not invalidate or affect the other portions or parts of this Agreement, which shall remain in full force and effect. Furthermore, each covenant contained in this Agreement shall stand independently and be enforceable without regard to any other covenants or to any other provisions of this Agreement.

 

22. Waiver. The waiver by the Company of a breach of any provision contained in this Agreement shall not operate or be construed as a waiver of any subsequent breach or as a waiver of any other provisions of this Agreement.

 

-8-


23. Headings. The headings of the Sections hereof are provided for convenience only and are not to serve as a basis for interpretation or construction, and shall not constitute a part of this Agreement.

 

24. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one instrument. Delivery of an executed counterpart of this Agreement by facsimile or portable document format (.pdf) attachment to electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement.

 

25. No Liability for Good Faith Determinations. The Company and the members of the Board shall not be liable for any act, omission or determination taken or made in good faith with respect to this Agreement or the Performance-Based Restricted Stock Units granted hereunder.

 

26. Consent to Electronic Delivery; Electronic Signature. In lieu of receiving documents in paper format, the Participant agrees, to the fullest extent permitted by law, to accept electronic delivery of any documents that the Company may be required to deliver (including, but not limited to, prospectuses, prospectus supplements, grant or award notifications and agreements, account statements, annual and quarterly reports and all other forms of communications) in connection with this and any other award made or offered by the Company. Electronic delivery may be via a Company electronic mail system or by reference to a location on a Company intranet to which the Participant has access. The Participant hereby consents to any and all procedures the Company has established or may establish for an electronic signature system for delivery and acceptance of any such documents that the Company may be required to deliver, and agrees that his or her electronic signature is the same as, and shall have the same force and effect as, his or her manual signature.

[Signature Page Follows]

 

-9-


IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Agreement effective as of the Date of Grant set forth above.

 

KEY ENERGY SERVICES, INC.
By:  

/s/ Scott P. Miller

Name:   Scott P. Miller
Title:   Senior Vice President, Operations Services and Chief Administrative Officer

The Participant (a) acknowledges receipt of the Plan incorporated herein, (b) confirms that the prospectus for the Plan has been made available to the Participant, (c) acknowledges that he or she has read this Agreement, the Plan and the Plan prospectus and understands the terms and conditions of them, (d) accepts the Performance-Based Restricted Stock Unit Award, (e) agrees to be bound by, and comply with, the terms of the Plan and this Agreement, including the restrictive covenants contained in Appendix A, and (f) agrees that all decisions and determinations of the Administrator with respect to the Performance-Based Restricted Stock Unit Award shall be final and binding on the Participant and any other person having or claiming an interest under the Performance-Based Restricted Stock Unit Award.

The Participant named below hereby accepts the terms of this Agreement and the Plan.

 

 

 

 

[NAME]

[ADDRESS]

 

EMPLOYEE ID NUMBER: []

Signature Page


APPENDIX A

PROTECTION OF INFORMATION; NON-COMPETITION; NON-SOLICITATION

1. Non-Disclosure of Confidential Information. In the course of the Participant’s employment with the Company or any of the Company’s direct or indirect subsidiaries (collectively, “subsidiaries” or each a “subsidiary”), and the performance of the Participant’s duties on behalf of the Company or any of its subsidiaries, the Participant will be provided with, and will have access to Confidential Information (as defined below). In consideration, and as a condition, of the Participant’s receipt of and access to Confidential Information, and as a condition of the Company’s entry into this Agreement, the Participant, both during the course of the Participant’s employment with the Company or any of its subsidiaries and thereafter, shall not disclose any Confidential Information to any person or entity and shall not use any Confidential Information except for the benefit of the Company or its subsidiaries or with the express written consent of the Chief Executive Officer or the General Counsel of the Company. The Participant shall follow all Company policies and protocols regarding the security of all documents and other material containing Confidential Information (regardless of the medium on which such Confidential Information is stored). This Section 1 shall apply to all Confidential Information, whether known or later to become known to the Participant during the period that the Participant is employed or affiliated with the Company or any of its subsidiaries.

2. Permitted Disclosures. Notwithstanding the foregoing, or any other provision of this Agreement or the Plan:

 

  a. the Participant shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is: (i) made (A) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and (B) solely for the purpose of reporting or investigating a suspected violation of law; (ii) made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or (iii) protected under the whistleblower provisions of applicable law;

 

  b. in the event the Participant files a lawsuit for retaliation by the Company or any of its subsidiaries for the Participant’s reporting of a suspected violation of law, the Participant may (i) disclose a trade secret to the Participant’s attorney and (ii) use the trade secret information in the court proceeding related to such lawsuit, in each case, if the Participant (A) files any document containing such trade secret under seal; and (B) does not otherwise disclose such trade secret, except pursuant to court order; and

 

  c.

nothing shall prevent the Participant from lawfully, and without obtaining prior authorization from the Company or any of its subsidiaries, (i) initiating communications directly with, cooperating with, providing information to, causing information to be provided to, or otherwise assisting in an investigation by the U.S. Securities and Exchange Commission (the “SEC”) or any other governmental or regulatory agency, entity, or official(s) (collectively, “Governmental Authorities”) regarding a possible violation of any law; (ii) responding to any inquiry or legal process directed to an employee individually from any Governmental Authority; (iii) testifying, participating or

 

i


  otherwise assisting in an action or proceeding by any Governmental Authorities relating to a possible violation of law, including providing documents or other confidential information to Governmental Authorities; or (iv) receiving an award for information provided to the SEC or any other Governmental Authority. Neither the Plan nor this Agreement (nor any other agreement between the Participant and the Company or a subsidiary of the Company) shall be construed or applied to require the Participant to obtain prior authorization from the Company or any of its subsidiaries before engaging in any of the foregoing conduct referenced in this Section 2, or to notify the Company or any of its subsidiaries of having engaged in any such conduct.

3. Definition of Confidential Information. As used herein, “Confidential Information” means all non-public or proprietary information of, or related to, the Company or any of its subsidiaries, including, without limitation, all designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether patentable or not, that (i) are acquired by or disclosed to the Participant during the period that the Participant is or has been employed or affiliated with the Company or any of its subsidiaries (whether acquired or disclosed during business hours or otherwise and whether acquired or disclosed on the Company’s premises or otherwise) or (ii) relate to the businesses or properties, products or services of the Company or any of its subsidiaries (including all such information relating to technical information, including engineering and scientific research, development, methodology, devices and processes; formulas and chemical compositions; blueprints, designs and drawings; financial information, budgets, projections and results; business and marketing plans, strategies, and programs; employee and contractor lists and records; business methods, and operating and production procedures; pricing, sales data, prospect and customer lists and information; supplier and vendor lists and information; terms of commercial contracts, as well as all such information relating to corporate opportunities, operations, future plans, methods of doing business, business plans, strategies for developing business and market share, research, financial and sales data, pricing terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or acquisition targets or their requirements, the identity of key contacts within customers’ organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names and marks). Moreover, all documents, presentations, drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, e-mail, voice mail, electronic databases, maps, data, models and all other writings or materials of any type including or embodying any Confidential Information shall be the sole and exclusive property of the Company or any of its subsidiaries and is subject to the same restrictions on disclosure applicable to all Confidential Information as set forth above. Confidential Information does not include any information that is or becomes generally available to the public other than as a result of a disclosure or wrongful act of the Participant or any of the Participant’s agents.

4. Non-Competition; Non-Solicitation.

 

  a.

In granting the Restricted Stock Unit Award to the Participant, the Company provides the Participant a further incentive to build the Company’s goodwill and links the Participant’s interests to the Company’s long-term business interests. As an inducement for the Company to grant the Restricted Stock Unit Award and enter into this Agreement, and in order to protect the Confidential Information, and the Company’s and its

 

ii


  subsidiaries goodwill, the Participant voluntarily agrees to the covenants set forth in this Section 4(a). The Participant agrees and acknowledges that the limitations and restrictions set forth herein, including the geographical and temporal restrictions on certain activities, are reasonable in all respects and not oppressive and are material and substantial part of the Company’s willingness to enter into this Agreement, and are intended and necessary to protect the Company’s and its subsidiaries’ Confidential Information, goodwill, and substantial and legitimate business interests.

 

  b. The Participant agrees that during the Prohibited Period, the Participant shall not, without prior written approval of the Company, directly or indirectly, for the Participant, or on behalf of or in conjunction with any other person or entity of whatever nature:

 

  i. engage in or carry on within the Market Area in competition with the Company or any of its subsidiaries in any aspect of the Business, which prohibition shall prevent the Participant from directly or indirectly: (A) owning, managing, operating, becoming an officer or director of any person or entity engaged in, or planning to engage in, the Business in the Market Area in competition, or anticipated competition, with the Company or any of its subsidiaries, or (B) in the Market Area, joining, becoming employee or consultant of, or otherwise being affiliated with any person or entity engaged in, or planning to engage in, the Business in the Market Area in competition, or anticipated competition, with the Company or any of its subsidiaries (in each case, with respect to this clause (B), in any capacity in which the Participant’s duties are the same or similar to those performed for the Company or any of its subsidiaries);

 

  ii. appropriate any Business Opportunity of, or relating to, the Company or any of its subsidiaries located in the Market Area;

 

  iii. within the Market Area, solicit, canvass, approach, encourage, entice or induce any customer or supplier of the Company or any of its subsidiaries with whom or which the Participant had contact in the last 24 months of his or her employment with the Company or its subsidiaries or about whom or which the Participant obtained Confidential Information to cease or lessen such customer’s or supplier’s business with the Company or any of its subsidiaries in the Business; or

 

  iv. solicit, canvass, approach, encourage, entice or induce any employee or contractor of the Company or any of its subsidiaries to terminate his, her or its employment or engagement therewith, excluding general advertisements and solicitations not targeted at the employees or contractors of the Company or its subsidiaries.

 

  v.

Notwithstanding the above-referenced limitations in Sections 4(b)(i), 4(b)(ii) and 4(b)(iii), such limitations shall not apply following the termination of the Participant’s employment with the Company and (as applicable) any of its subsidiaries in those portions of the Market Area located within the State of Oklahoma. Instead, the Participant agrees that, during the portion of the Prohibited Period that occurs after the Participant is no longer employed by the Company or any of its subsidiaries, the restrictions on the Participant’s activities

 

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  within those portions of the Market Area located within the State of Oklahoma (in addition to those restrictions set forth in Sections 1 and 4(b)(iv) herein) shall be as follows: the Participant will not directly or indirectly solicit the sale of goods, services, or a combination of goods and services from the established customers of the Company or of any of its subsidiaries.

 

  c. For purposes of this Section 4, the following terms shall have the following meanings:

 

  i. Business” means the business and operations that are the same or similar to those performed by the Company or any of its subsidiaries and for which the Participant obtained Confidential Information or had direct or indirect responsibilities during the period of the Participant’s employment with the Company or any of its subsidiaries, which business and operations include (if Participant obtained Confidential Information or had direct or indirect responsibilities with respect to such business and operations on behalf of the Company or any of its subsidiaries during the period of his or her employment): rig-based and coiled tubing-based well maintenance and workover services, well completion and recompletion services, fluid management services, and fishing and rental services.

 

  ii. Business Opportunity” shall mean any commercial, investment or other business opportunity relating to the Business.

 

  iii. Market Area” means: (a) each county in which the Participant was based or performed material services on behalf of the Company or any of its subsidiaries; and (b) each of the following basins and oil and gas shale plays: Bakken, Barnett, Denver-Julesberg, Eagle Ford, Fayetteville, Granite Wash, Haynesville, Marcellus, Mississippi Lime, Niobrara, Permian, Powder River, SCOOP, STACK, Tuscaloosa, Williston, and Woodford; provided, however, a basin or play shall not be included within the Market Area if: (1) the Participant had no direct or indirect responsibilities with respect to such basin or play during the last 24 months of the Participant’s employment or engagement with the Company or any of its subsidiaries, or (2) the Participant obtained no Confidential Information with respect the Company’s or any of its subsidiaries’ Business in such basin or play.

 

  iv. Prohibited Period” shall mean the period during which the Participant is employed by the Company or any of its subsidiaries and continuing for a period of twelve (12) months following the date that the Participant is no longer employed by the Company or any of its subsidiaries.

5. Return of Confidential Information. Upon the termination of the Participant’s employment with the Company or any of its subsidiaries, and at any other time upon request of the Company, the Participant shall promptly surrender and deliver to the Company all documents (including electronically stored information) and all copies thereof and all other materials of any nature containing or pertaining to all Confidential Information (including any Company-issued computer, mobile devise or other equipment) in the Participant’s possession, custody or control and the Participant shall not retain any such document or other materials or property.

 

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6. Specific Performance. Because of the difficulty of measuring economic losses to the Company and its subsidiaries as a result of a breach of the foregoing covenants, and because of the immediate and irreparable damage that would be caused to the Company and its subsidiaries for which it would have no other adequate remedy, the Participant agrees that the Company and each of its subsidiaries shall be entitled to enforce the foregoing covenants, in the event of a breach, by injunctions and restraining orders and that such enforcement shall not be the Company’s or its subsidiaries’ exclusive remedy for a breach but instead shall be in addition to all other rights and remedies available to the Company and its subsidiaries, at law and equity.

7. Severability. The covenants in this Appendix A to the Agreement are severable and separate, and the unenforceability of any specific covenant (or any portion thereof) shall not affect the provisions of any other covenant (or portion thereof). Moreover, in the event any arbitrator or court of competent jurisdiction shall determine that the scope, time or territorial restrictions set forth are unreasonable, then it is the intention of the Participant and the Company that such restrictions be enforced to the fullest extent which the arbitrator deems reasonable and this Agreement shall thereby be reformed.

8. Third-Party Beneficiaries. Each of the Company’s subsidiaries that is not a signatory hereto shall be a third-party beneficiary of the Participant’s representations, covenants and obligations set forth in this Appendix A and shall be entitled to enforce such representations, covenants and obligations as if a party hereto.

 

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