What's Market: Negotiating Executive Employment Agreements: Interim CEOs | Practical Law

What's Market: Negotiating Executive Employment Agreements: Interim CEOs | Practical Law

A comparison of certain employment agreement provisions for Interim Chief Executive Officers from various companies, including Cheniere Energy, Inc., Soupman Inc., and Twitter, Inc., using What's Market, Executive Employment Agreements: Detailed Analysis.

What's Market: Negotiating Executive Employment Agreements: Interim CEOs

Practical Law Article w-001-4892 (Approx. 6 pages)

What's Market: Negotiating Executive Employment Agreements: Interim CEOs

by Practical Law Employee Benefits & Executive Compensation
Published on 08 Mar 2016 • USA (National/Federal)
A comparison of certain employment agreement provisions for Interim Chief Executive Officers from various companies, including Cheniere Energy, Inc., Soupman Inc., and Twitter, Inc., using What's Market, Executive Employment Agreements: Detailed Analysis.
Interim chief executive officers (Interim CEOs) generally fill the CEO role for a relatively short time during a period of transition or turmoil. For example, a company's CEO may become ill suddenly or be forced out by the board of directors. Because Interim CEOs are a stopgap while the company searches for a permanent leader, employers often negotiate short employment terms and the flexibility to terminate the executive's employment without paying severance. While increased compensation is sometimes used to counterbalance the inherent difficulty of the job and the lack of job security, executive pay varies widely based on case-specific considerations, including an employer's business needs and an executive's particular skills and experience.
Use the table below to compare severance and compensation provisions from publicly filed Interim CEO employment agreements, including:
  • Jack Dorsey, Interim Chief Executive Officer and Co-Founder of Twitter, Inc. and Chief Executive Officer and Co-Founder of Square, Inc. Dorsey was removed from the position of Twitter, Inc. CEO in 2008, was appointed Interim CEO in July 2015, and became permanent CEO in October 2015. Dorsey's interim role may, therefore, be better characterized as a trial run for the position of CEO.
  • Jamieson Karson, Interim Chief Executive Officer and Chairman of Soupman, Inc. and former Chief Executive Officer of Steven Madden, LTD, who continues to hold significant roles at several other companies.
  • Neal Shear, an industry expert standing in for the ousted Chief Executive Officer of Cheniere Energy, Inc.
For more information on negotiating employment agreements generally, see Practice Note, Negotiating and Drafting an Executive Employment Agreement.
EMPLOYMENT AGREEMENT
Cheniere Energy, Inc.
Interim Chief Executive Officer and President
December 12, 2015
Soupman, Inc. 
Interim Chief Executive Officer and Chairman of the Board
June 26, 2015
Twitter, Inc.
Interim Chief Executive Officer
June 11, 2015
TERM
Seven months and three days, subject to extension on mutual agreement.

Section 1
None specified.
Indefinite term.
*The executive's start date is July 1, 2015.

Section 2

Section 6
SEVERANCE ON TERMINATION WITHOUT CAUSE
None
Severance on termination without cause is the same as severance on termination for good reason.

Section 5
If the employer terminates the executive's employment as Chairman of the Board for any reason, then the executive receives 1,250,000 shares of fully vested common stock.

Severance on termination without cause differs from severance on termination for good reason.

Page 3
None specified.
SEVERANCE ON TERMINATINO FOR GOOD REASON
None
Severance on termination for good reason is the same as severance on termination without cause.

Section 5
If the executive voluntarily terminates his employment, then the employer is not obligated to pay severance.

*There is no concept of good reason in the employment agreement. Therefore, any termination initiated by the executive is likely to be considered a voluntary termination.

Severance on termination for good reason differs from severance on termination without cause.

Page 3
None specified.
DOUBLE TRIGGER CHANGE IN CONTROL BENEFTIS
None

Section 5
None specified.
None specified.
ANNUAL RATE OF BASE SALARY
$1,000,000

Section 3(a)
None specified.
The executive will not be entitled to any base salary for services as Interim Chief Executive Officer until the board agrees on a compensation package, which will be done later in 2015 during the board's annual assessment and setting of executive compensation.

Section 3
ANNUAL BONUS AND CASH INCENTIVES
None specified.
None specified.
The executive will not be entitled to any incentive compensation for services as Interim Chief Executive Officer until the board agrees on a compensation package, which will be done later in 2015 during the board's annual assessment and setting of executive compensation.

Section 3
SIGN-ON EQUITY GRANTS
36,330 phantom units, payable under the employer's long-term cash incentive plan and a phantom unit award agreement that was attached to the employment agreement, subject to cliff vesting on June 15, 2016 unless the executive is terminated by the employer for cause or the executive voluntarily terminates his employment without good reason before the earliest of the date a successor to the Chief Executive Officer begins employment, a change in control, or June 15, 2016.

Section 3(c)

Phantom Unit Award Agreement
None specified.
None specified.
ONGOING EQUITY GRANTS
None specified.
For the first year of employment, the executive will receive monthly compensation grants of 416,667 shares of restricted stock, up to 5,000,000 shares if the executive remains employed for the entire year.

Beginning on the 13-month anniversary of the employment agreement's approval through July 15, 2017, the executive will receive monthly compensation grants of restricted stock with a value of $16,666.67. The number of shares awarded will be based on the closing price of the employer's common stock on the 15th day of each month.

If the employer's common stock trades at $.25 or higher for 10 trading days in any 30 day period, then the executive will receive a one-time bonus of 400,000 shares of restricted stock.

If the employer's common stock trades at $1.00 or higher for 10 trading days in any 30 day period, then the executive will receive a one-time bonus of 100,000 shares of restricted stock.

If the employer's common stock trades at $2.00 or higher for 10 trading days in any 30 day period, then the executive will receive a one-time bonus of 50,000 shares of restricted stock.

If the employer's common stock trades at $4.00 or higher for 10 trading days in any 30 day period, then the executive will receive a one-time bonus of 25,000 shares of restricted stock.

The executive will receive 5,000 shares of restricted stock for every new $1 million increment in annual sales, subject to a maximum of 500,000 shares or $100 million in sales.

Page 1

Page 2
The executive will not be entitled to any equity compensation for services as Interim Chief Executive Officer until the board agrees on a compensation package, which will be done later in 2015 during the board's annual assessment and setting of executive compensation.

Section 3
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 cover terms that are typically heavily negotiated, such as compensation, severance and non-competition provisions, and often reflect emerging trends.
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.