Separation Agreement (39K)
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SEPARATION AGREEMENT
This agreement ("Agreement") is made among Charles D. Erwin, an individual
residing in Houston, Texas ("Erwin"), Hanover Compressor Company, a Delaware
corporation ("HCC"), and Hanover Compression Limited Partnership ("Hanover
Compression," and together with HCC, "Hanover") following significant
negotiation by both parties, fully represented by counsel.
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Hanover and Erwin, intending to be legally bound,
hereby agree as follows:
1. Effective Date. The Agreement will become final, binding and enforceable as
of the Effective Date (as hereafter defined).
2. Termination of Employment. Each of Hanover and Erwin has determined that it
is in their respective best interest to sever their relationship, including
his employment relationship with Hanover. In exchange for the waiver and
release and other substantial promises by Erwin contained herein, Hanover
agrees that Erwin may resign from employment, and Erwin hereby resigns from
all positions he holds as an employee, agent, representative, officer,
and/or director of HCC its subsidiaries and affiliates, and any entity in
which HCC may hold directly, or indirectly, any interest (collectively, the
"Hanover Entities") effective August 2, 2002 (the "Effective Date"). In
connection with the foregoing, Erwin agrees that he will execute such
resignation letters and other similar documents as Hanover may reasonably
require in connection with the foregoing.
3. Payments to Erwin. In further exchange for the waiver and release and other
substantial promises by Erwin contained herein, Hanover agrees as follows:
a. Within three (3) business days after the Effective Date, Hanover
will deliver to Erwin a final paycheck for all wages earned through the
Effective Date, plus any accrued but unused vacation, less any and all
customary and usual deductions or withholdings.
b. Within thirty (30) days after the Effective Date, Hanover will
reimburse Erwin for all necessary and reasonable expenses that Erwin
has incurred on behalf of the Hanover Entities prior to the Effective
Date, according to the standard policies and procedures of Hanover
regarding reimbursement of such expenses. Further, Hanover will
reimburse Erwin or pay directly for Erwin's reasonable attorney's fees
incurred with respect to the negotiation and execution of this
Agreement.
c. Hanover's Houstonian membership which Erwin has been using will be
assigned from Hanover to Erwin, without charge, and Hanover shall pay
any remaining balance on the initiation fee. Erwin shall be responsible
for all dues and expenses relating thereto from and after the Effective
Date.
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d. Except as otherwise specifically provided in this Agreement, Erwin
will not be eligible to participate in or accumulate any credit under
the provisions of any retirement plan, the vacation policy, or any
other employee benefit plan or policy of Hanover from and after the
Effective Date. No further bonus will be paid to Erwin under any bonus
plan or policy.
4. Stock Options. It is expressly agreed that Erwin may exercise any
unexercised vested outstanding options ("Stock Options") granted pursuant
to any of HCC's various stock option plans and stock option agreements
between Erwin and HCC (such stock option plans and stock option agreements
being herein collectively referred to as the "Stock Option Agreements"),
but only in accordance with the terms and provisions of the operative Stock
Option Agreement, including those provisions relating to termination of
employment; provided, however, that such Stock Option Agreements shall not
be construed to forfeit any vested Stock Options upon termination of
employment but shall allow the exercise of such Stock Options in accordance
with the post-termination exercise period associated with voluntary
departure set forth in the applicable Stock Option Agreement.
Stock Options that have not vested before the Effective Date shall be
forfeited. No further awards, accruals, vesting, or payments of any kind
will be made to Erwin for any plan year. In connection with any exercise of
any Stock Options, Erwin shall first fully satisfy and fund HCC's federal
income tax withholding obligations, if any, that may arise in connection
with Erwin's exercise of such Stock Option and any related requirement
under the operative Stock Option Agreement. In addition, Erwin agrees that
in connection with each exercise of any Stock Option, Erwin will
immediately deliver the certificates evidencing the resulting shares of
stock (the "Option Shares") to HCC in freely transferable form as
collateral for the repayment of the Existing Loans (as defined below)
together with such stock powers, financing statements and security
agreements as HCC shall reasonably require to evidence and perfect a first
priority security interest in the Option Shares and (ii) within five (5)
business days after the Effective Date, Erwin will execute and deliver to
HCC such security agreements and financing statements as HCC shall
reasonably require to evidence and perfect a first priority security
interest in any Option Shares that have been, or may in the future be,
issued pursuant to the Stock Options (collectively the "2002 Stock Pledge
Agreements"). All Option Shares shall secure the Existing Loan pursuant to
the terms of the 2002 Stock Pledge Agreements and on terms consistent with
this Agreement. The 2002 Stock Pledge Agreements shall include provisions
that allow or require, as indicated below, the sale of all or a portion of
the Option Shares covered thereby only after fifteen (15) business days
after notice to Erwin so as to allow him time to provide additional
adequate collateral as required and the resulting proceeds shall be applied
as follows in the following order of priority:
a. First, at the time of the last exercise (or lapse, if earlier) of
the foregoing Stock Options, a determination shall be made of the
federal income taxes that will accrue (at the maximum marginal federal
income tax rate for the year 2002 for individuals filing jointly) as a
result of the grant and exercise of the foregoing Stock Options (less
the amount of required federal income tax withholding by HCC) and a
number of Option Shares having a market value at such time equal to the
amount of such taxes, plus cost of sale, shall be released from the
2002 Stock Pledge Agreements and delivered to Erwin; and
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