JONES
& KELLER, P.C.
1625
Broadway, Suite 1600
Denver,
Colorado 80202
Telephone
(303) 573-1600
Telecopier
(303) 573-8133
October
22, 2009
VIA
EDGAR
Mr. H.
Roger Schwall, Assistant Director
Mr. John
Lucas, Staff Attorney
United
States Securities and Exchange Commission
100 F
Street, N.E.
Washington,
D.C. 20549
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Re:
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Natural
Gas Services Group, Inc.
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Definitive
Proxy Filed April 27, 2009
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File No. 1-31398
Gentlemen:
This
letter is submitted on behalf of Natural Gas Services Group, Inc. (the
“Company”) in response to the Staff’s verbal comment regarding disclosure
contained in the Definitive Proxy Statement filed April 27, 2009.
Comment by the SEC
Staff
On
a supplemental basis, we request that the Company revise its Summary
Compensation Table to provide disclosure regarding the election by the named
officers to take a portion of their cash bonuses in stock options.
Response of the
Company
As noted
in the discussion of the Incentive Cash Bonus Program in the Proxy Statement, in
early 2009, our Chief Executive Officer recommended and the Compensation
Committee elected to issue a portion of the bonus for each executive officer by
an award of stock options rather than cash. The recommendation and
election to pay out bonuses in this manner were made in order to link the
interests of management with those of our stockholders. Thus, in
March 2009, our Board of Directors granted and issued the options
disclosed on
page 17 of the Proxy Statement.
Mr. H.
Roger Schwall, Assistant Director
Mr. John
Lucas, Staff Attorney
United
States Securities and Exchange Commission
October
22, 2009
Page
2
The
options were not included in the Summary Compensation Table in the “Option
Awards” column since that table is as of December 31, 2008, and as noted above,
the options were not authorized and granted until March
2009. However, the amount of cash bonus in the table was shown as the
bonus amount net of the portion of the bonus taken in options. In
order to clarify the disclosure, to the extent that an election to take a
portion of any earned cash bonuses in stock options is allowed by the
Compensation Committee in future years, we propose to modify the Summary
Compensation Table to show the gross amount of the bonus with related footnotes
describing the fact that subsequent to the end of the year, an election to take
a portion of the bonus in stock options was made. As an example, we
have reproduced our 2008 Summary Compensation Table below and indicated its
proposed modifications in italicized bold for ease of review.
Summary
Compensation Table
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Name
and
Principal
Position
(a)
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Year
(b)
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Salary
($)
(c)
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Bonus
($)
(d)
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Stock
Awards
($)
(e)
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Option
Awards
($)
(1)
(f)
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Non-Equity
Incentive
Plan
Compensation
(2)
(g)
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Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
(h)
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All
Other
Compensation
($)(3)
(i)
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Total
($)
(j)
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Stephen
C. Taylor
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2008
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$ | 271,250 | - | − | $ | 51,211 | (4) | $ | 116,875 | (9) | − | $ | 14,029 | $ | 453,365 | |||||||||||||||||
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Chairman,
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2007
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207,982 | - | − | 270,106 | (5) | 89,250 | − | 10,168 | 577,506 | |||||||||||||||||||||||
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President and
Chief
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2006
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173,615 | − | − | 216,000 | (6) | 87,500 | − | 8,994 | 486,109 | |||||||||||||||||||||||
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Executive Officer
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|||||||||||||||||||||||||||||||||
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Earl
R. Wait
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2008
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124,519 | - | − | 12,036 | (7) | 37,188 | (10) | − | 18,540 | 192,283 | ||||||||||||||||||||||
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Vice President -
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2007
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112,500 | - | − | 12,023 | (8) | 33,469 | − | 19,766 | 177,758 | |||||||||||||||||||||||
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Accounting
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2006
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100,769 | − | − | - | 39,375 | − | 18,490 | 158,634 | ||||||||||||||||||||||||
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Paul
D. Hensley
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2008
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137,135 | - | − | − | 49,300 | (11) | − | 12,902 | 199,337 | |||||||||||||||||||||||
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Director,
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2007
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130,500 | - | − | − | 43,078 | (12) | − | 12,582 | 186,160 | |||||||||||||||||||||||
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Senior Vice President
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2006
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130,500 | − | − | − | 50,680 | (13) | − | 13,551 | 194,731 | |||||||||||||||||||||||
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-
Technology
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James
R. Hazlett
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2008
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124,615 | - | − | − | 37,188 | (14) | − | 11,761 | 173,564 | |||||||||||||||||||||||
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Vice President-
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2007
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115,000 | - | − | − | 34,213 | − | 9,573 | 158,786 | ||||||||||||||||||||||||
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Technical Services
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2006
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105,615 | − | − | − | 40,250 | − | 7,723 | 153,588 | ||||||||||||||||||||||||
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(1)
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The
amounts in column (f) reflect the dollar amounts recognized for financial
statement reporting purposes for the fiscal years ended December 31, 2006,
2007 and 2008, in accordance with FAS 123(R), associated with stock option
grants under our 1998 Stock Option Plan and the stock option grant to Mr.
Taylor under his employment agreement and thus include amounts associated
with grants made in 2007 and prior to 2007. Assumptions used to
calculate these amounts are included in footnote 10 to our audited
consolidated financial statements for the fiscal year ended December 31,
2006, in footnote 9 to our audited consolidated financial statements for
the fiscal year ended December 31, 2007 and in footnote 9 to our audited
consolidated financial statements for the fiscal year ended December 31,
2008.
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(2)
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The
amounts in column (g) reflect the cash bonus awards to the named executive
officers under our Incentive Cash Bonus Program, which is discussed in
further detail on page 16 under the caption “Short-Term Incentives –
Incentive Cash Bonus Program.”
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Mr. H.
Roger Schwall, Assistant Director
Mr. John
Lucas, Staff Attorney
United
States Securities and Exchange Commission
October
22, 2009
Page
3
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(3)
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The
amounts shown in column (i) include matching contributions made by Natural
Gas Services Group to each named executive officer under our 401(k) plan
and the aggregate incremental cost to Natural Gas Services Group of
perquisites provided to our named executive officers as follows:
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Name
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Year
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Automobile
Allowance
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Personal
Use of Company Provided Automobiles
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Additional
Incremental
Portion
of
Health Insurance
Premiums
Paid for Officers Only
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401(k)
Plan
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Total(a)
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Stephen
C. Taylor
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2008
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$ | - | $ | 1,237 | $ | 1,051 | $ | 6,326 | $ | 14,029 | ||||||||||
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2007
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- | 1,237 | 956 | 5,690 | 10,168 | ||||||||||||||||
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2006
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- | 4,566 | 927 | 1,766 | 8,994 | ||||||||||||||||
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Earl
R. Wait
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2008
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8,654 | − | 3,185 | 4,212 | 18,540 | |||||||||||||||
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2007
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9,000 | − | 4,727 | 3,564 | 19,766 | ||||||||||||||||
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2006
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9,000 | − | 4,581 | 2,909 | 18,490 | ||||||||||||||||
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Paul
D. Hensley
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2008
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- | 1,437 | 3,185 | 5,557 | 12,902 | |||||||||||||||
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2007
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- | 2,145 | 3,651 | 3,915 | 12,582 | ||||||||||||||||
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2006
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- | 3,464 | 2,895 | 4,582 | 13,551 | ||||||||||||||||
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James
R. Hazlett
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2008
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- | 923 | 5,012 | 3,334 | 11,761 | |||||||||||||||
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2007
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- | 923 | 4,727 | 1,393 | 9,573 | ||||||||||||||||
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2006
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- | 1,041 | 4,582 | − | 7,723 | ||||||||||||||||
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Total
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2008
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$ | 8,654 | $ | 3,597 | $ | 12,433 | $ | 19,429 | $ | 57,232 | ||||||||||
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2007
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9,000 | 4,305 | 14,061 | 14,562 | 52,089 | ||||||||||||||||
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2006
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9,000 | 9,071 | 12,985 | 9,257 | 48,758 | ||||||||||||||||
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(a)
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The
amounts reflected in this column include a nominal cash Christmas Bonus
paid to each of the named executive officers in the fiscal years ended
December 31, 2006, 2007 and 2008.
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(4)
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This
amount reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2008, in
accordance with FAS 123(R), for 7,500 shares of common stock that vested
on November 21, 2008 under the stock option granted to Mr. Taylor on
November 21, 2006 under our 1998 Stock Option
Plan.
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(5)
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This
amount reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2007, in
accordance with FAS 123(R), for 15,000 shares of common stock that vested
on January 13, 2007 under the stock option granted to Mr. Taylor in August
2005 under his employment agreement and for 7,500 shares of common stock
that vested on November 21, 2007 under the stock option granted to Mr.
Taylor on November 21, 2006 under our 1998 Stock Option
Plan.
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(6)
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This
amount reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2006, in
accordance with FAS 123(R), for 15,000 shares of common stock that vested
on January 13, 2006 under the stock option granted to Mr. Taylor in August
2005 under his employment
agreement.
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(7)
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This
amount reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2008, in
accordance with FAS 123(R), for 1,666 shares of common stock that vested
on November 21, 2008 under the stock option granted to Mr. Wait on
November 21, 2006 under our 1998 Stock Option
Plan.
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Mr. H.
Roger Schwall, Assistant Director
Mr. John
Lucas, Staff Attorney
United
States Securities and Exchange Commission
October
22, 2009
Page
4
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(8)
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This
amount reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended December 31, 2007, in
accordance with FAS 123(R), for 1,666 shares of common stock that vested
on November 21, 2007 under the stock option granted to Mr. Wait on
November 21, 2006 under our 1998 Stock Option
Plan.
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(9)
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In
March 2009, we elected to pay a portion of the earned cash bonus in stock
options rather than cash. Each executive officer was required
to take at least 25% of his bonus in options. Furthermore, each
officer could elect to take all or part of the remaining 75% of the cash
bonus in options. In lieu of $46,750 of his 2008 cash bonus
included in column (g) in the table above, Mr. Taylor was granted a stock
option to purchase 23,852 shares at an exercise price of $7.84 per share,
which was equal to the fair market value of our common stock on the date
of grant. See pages 16 and 17 under the caption “Short-Term
Incentives – Incentive Cash Bonus Program” for further
details.
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(10)
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In
March 2009, we elected to pay a portion of the earned cash bonus in stock
options rather than cash. Each executive officer was required
to take at least 25% of his bonus in options. Furthermore, each
officer could elect to take all or part of the remaining 75% of the cash
bonus in options. In lieu of $22,313 of his 2008 cash bonus included
in column (g) in the table above, Mr. Wait was granted a stock option to
purchase 11,384 shares at an exercise price of $7.84 per share, which was
equal to the fair market value of our common stock on the date of
grant. See pages 16 and 17 under the caption “Short-Term Incentives
– Incentive Cash Bonus Program” for further
details.
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(11)
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In
March 2009, we elected to pay a portion of the earned cash bonus in stock
options rather than cash. Each executive officer was required
to take at least 25% of his bonus in options. Furthermore, each
officer could elect to take all or part of the remaining 75% of the cash
bonus in options. In lieu of $12,325 of his 2008 cash bonus included
in column (g) in the table above, Mr. Hensley was granted a stock option
to purchase 6,288 shares at an exercise price of $7.84 per share, which
was equal to the fair market value of our common stock on the date of
grant. See pages 16 and 17 under the caption “Short-Term Incentives
– Incentive Cash Bonus Program” for further
details.
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(12)
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This
amount reflects the cash bonus awarded to Mr. Hensley under our Incentive
Cash Bonus Program. Pursuant to the employment agreement
between Mr. Hensley and Screw Compression Systems, Inc., our former
subsidiary, which expired according to its own terms on January 3, 2008,
the amount awarded to Mr. Hensley was calculated using a base salary of
$126,700 and a target award opportunity of up to
40%.
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(13)
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This
amount reflects the cash bonus awarded to Mr. Hensley under our Incentive
Cash Bonus Program. Pursuant to the employment agreement
between Mr. Hensely and Screw Compression Systems, Inc., our former
subsidiary, which expired according to its own terms on January 3, 2008,
the amount awarded to Mr. Hensley was calculated using a base salary of
$126,700 and a target award opportunity of up to
40%.
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(14)
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In
March 2009, we elected to pay a portion of the earned cash bonus in stock
options rather than cash. Each executive officer was required
to take at least 25% of his bonus in options. Furthermore, each
officer could elect to take all or part of the remaining 75% of the cash
bonus in options. In lieu of $14,875 of his 2008 cash bonus
included in column (g) in the table above, Mr. Hazlett was granted a stock
option to purchase 7,589 shares at an exercise price of $7.84 per share,
which was equal to the fair market value of our common stock on the date
of grant. See pages 16 and 17 under the caption “Short-Term
Incentives – Incentive Cash Bonus Program” for further
details.
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Mr. H.
Roger Schwall, Assistant Director
Mr. John
Lucas, Staff Attorney
United
States Securities and Exchange Commission
October
22, 2009
Page
5
The
Company has authorized us to acknowledge the following:
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·
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the
Company is responsible for the adequacy and accuracy of the disclosure in
the filing;
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·
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staff
comments or changes to disclosure in response to staff comments do not
foreclose the Commission from taking any action with respect to the
filing; and
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·
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the
Company may not assert staff comments as defense in any proceeding
initiated by the Commission or any person under the federal securities
laws of the United States.
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Please
feel free to contact me if you have any comments or questions.
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Very
truly yours,
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JONES
& KELLER, P.C.
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By:
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/s/
David A. Thayer
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David
A. Thayer
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