What's Market: Negotiating Executive Employment Agreements: Termination Provisions for Oil and Gas Industry Executives | Practical Law

What's Market: Negotiating Executive Employment Agreements: Termination Provisions for Oil and Gas Industry Executives | Practical Law

A comparison of certain termination provisions in employment agreements for Chief Executive Officers from the oil and gas industry, including Legend Oil and Gas, Ltd., Diamondback Energy and Crestwood Equity Partners LP, using What's Market, Executive Employment Agreements: Detailed Analysis.

What's Market: Negotiating Executive Employment Agreements: Termination Provisions for Oil and Gas Industry Executives

by Practical Law Employee Benefits & Executive Compensation
Published on 09 Jun 2015USA (National/Federal)
A comparison of certain termination provisions in employment agreements for Chief Executive Officers from the oil and gas industry, including Legend Oil and Gas, Ltd., Diamondback Energy and Crestwood Equity Partners LP, using What's Market, Executive Employment Agreements: Detailed Analysis.
Industry-specific considerations may impact the negotiation of executive employment agreements. For example, in the oil and gas industry, the frequent inclusion of embezzlement, fraud and similar termination triggers in employment agreements may be in response to misappropriation concerns. Use What's Market, Executive Employment Agreements: Detailed Analysis to:
  • Find and analyze summaries of industry-specific executive employment agreements.
  • Create comparison reports to review termination and other employment provisions across multiple agreements within the same industry.
The table below compares termination provisions from publicly filed oil and gas executive employment agreements, including the definitions of termination for cause and termination for good reason. For more information on negotiating termination events generally, see Practice Note, Negotiating and Drafting an Executive Employment Agreement: Termination of Employment.
EMPLOYMENT AGREEMENT
Chief Executive Officer
September 26, 2014
Chief Executive Officer
April 18, 2014
Chairman, Chief Executive Officer and President
January 21, 2014
CAUSE DEFINITION AND PROCEDURE
Willful failure to perform employment duties and responsibilities (other than due to incapacity due to physical or mental illness).
Willful failure to comply with any valid and legal board directive.
Willful dishonesty, illegal conduct or gross misconduct, in each case, which materially injures the employer.
Embezzlement, misappropriation or fraud related to the executive's employment.
Conviction of, or a plea of guilty or no contest to, a crime that constitutes a felony (or state law equivalent) or a misdemeanor involving moral turpitude, if the felony or other crime is work-related, materially impairs the executive's ability to perform services for the employer or results in material/reputational or financial harm to the employer.
Willful unauthorized disclosure of confidential information, as defined in the employment agreement.
Willful and knowing refusal or failure to perform employment duties in any material respect.
Willful misconduct or gross negligence in performing employment duties.
Material breach of the employment agreement, any other agreement related to the employer or any employer policy (including any applicable code of conduct).
Breach of the restrictive covenants or the confidentiality, non-interference, proprietary information and non-solicitation provisions of the employment agreement.
Conviction of or entry of a plea of guilty or no contest to any criminal act constituting a felony or involving fraud, dishonesty or moral turpitude.
Indictment for any felony involving embezzlement or theft or fraud.
Filing of a voluntary petition in bankruptcy or consenting to an involuntary petition in bankruptcy (or failing to vacate, within 90 days of the entry of any order approving an involuntary petition in bankruptcy) or the entry of a court order, judgment or decree that stays in effect for at least 90 days, on a creditor's application, adjudicating the executive as bankrupt or insolvent or the appointment of a receiver, trustee or liquidator of all or a substantial part of the executive's assets.
Dishonesty in connection with responsibilities as an employee.
Failure to comply with any lawful board directive, subject to written notice and a five business-day cure period.
Any inaccuracy of the statements in the representation and warranty section of the employment agreement.
Indictment for or conviction of, or entering a plea of guilty or no contest to, a felony or crime involving moral turpitude, or, in the course of the executive's employment, engagement in fraudulent or criminal activity.
Failure to follow the employer's reasonable directions.
Failure to devote all of the executive's professional time to the employer, subject to notice and cure procedures.
Material breach of any employer policy or code of conduct, subject to notice and cure procedures.
Material breach of any provision of the employment agreement or any other agreement between the executive and the employer, subject to notice and cure procedures.
Receipt of a kickback or rebate of any fee or expense paid by the employer.
Use of illegal drugs, the persistent excessive use of alcohol, or any other activity that materially impairs the executive's ability to perform employment duties or results in conduct bringing the employer into substantial public disgrace or disrepute.
Engagement in intentional, reckless or grossly negligent conduct that has or is reasonably likely to have a material adverse effect on the employer.
The notice and cure procedures provide that the board may, in its sole discretion, allow the executive a period of time, as determined by the board, to cure the act, conduct or cause event.
*For purposes of the ongoing equity awards, the terms cause and employee cause are defined in the Crestwood Equity Partners LP and Crestwood Midstream Partners LP long-term incentive plans.
The employment agreement uses the term employer cause rather than cause. If the executive is terminated by the employer for employer cause, then the executive does not receive any severance payments or benefits.
GOOD REASON DEFINITION AND PROCEDURE
Any material breach of any material provision of the employment agreement, including failure to pay the executive his base salary, annual bonus and cash incentives, sign-on and ongoing equity or his health care reimbursement, in each case, within five business days of the date that it is due, and a material, adverse change in the executive's authority, duties or responsibilities (other than while the executive is physically or mentally incapacitated or as required by law).
A change in control.
Subject to notice and cure procedures:
Material breach of the employment agreement.
Relocation of the executive's principal place of employment more than 25 miles outside of Midland, Texas.
Material reduction in the executive's position, duties or authority.
The notice and cure procedures require the executive to provide written notice within 90 days of the initial occurrence of the good reason event and a 30 business-day cure period.
Subject to notice and cure procedures:
Substantial and continuing reduction in employment responsibilities. However, a change in the executive's reporting relationship or a reduction in employment responsibilities during a termination notice period will not constitute a good reason event.
Material breach of any material provision of the employment agreement. 
Material and continuing reduction in the aggregate total of the executive's annual base salary, annual target bonus percentage and annual target equity percentage.
Relocation of the executive's principal place of employment by more than 50 miles.
The notice and cure procedures require the executive to provide written notice within 30 days of becoming aware of the good reason event and a 30-day cure period. The executive must terminate his employment within 30 days following the end of the cure period.
*The employment agreement uses the term employee cause rather than good reason. If the executive terminates for employee cause, then the executive receives severance payments and benefits (see Severance on termination for good reason).
What's Market, Executive Employment Agreements: Detailed Analysis provides summaries for a variety of executive positions and a diverse group of employers based on size, industry and location. The summaries reflect emerging trends across employment terms that are typically heavily negotiated, such as compensation, severance and non-competition provisions.
For additional executive employment agreement summaries, see What's Market, Executive Employment Agreements, which provides a broader sampling of publicly filed executive employment agreements summarized at a higher level. Each detailed summary contains a link to the underlying publicly filed executive employment agreement.