EMPLOYMENT AGREEMENT
Exhibit 10.7
FINAL
This Employment Agreement (this “Agreement”) is made by and between Oasis Petroleum Inc., a
Delaware corporation (the “Company”), and Xxxxxx X. Xxxx (“Employee”) effective as of June 18, 2010
(the “Effective Date”).
WHEREAS, the Company currently employs Employee as its Executive Vice President and Chief
Operating Officer;
WHEREAS, the Company desires to continue to employ Employee and Employee desires to continue
to be employed by the Company and to commit himself to serve the Company on the terms herein
provided.
NOW, THERFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Employment. The Company shall continue to employ Employee, and Employee accepts
continued employment with the Company, upon the terms and conditions set forth in this Agreement.
Unless earlier terminated pursuant to Section 4 below, the initial term of this Agreement shall
begin on the Effective Date and end on the third anniversary of the Effective Date (the “Initial
Term”), provided, however, that the term shall be automatically renewed for
successive one-year periods (each such period an “Extension Term”) unless the Company provides a
written notice of non-renewal to the Employee more than 60 days before the end of the Initial Term
or, if applicable, the current Extension Term. The Initial Term together with each Extension Term,
if any, shall be the “Term.” If the Company gives timely notice of non-renewal, then Employee’s
employment shall end on the last day of the Term. A termination of Employee’s employment and the
Term by reason of notice of non-renewal given by the Company shall be considered a termination
without Cause for purposes of Section 4.
2. Position and Duties; Exclusive Compensation and Services.
(a) During the Term, Employee shall hold the title of Executive Vice President and Chief
Operating Officer. The Company and Employee agree that the Employee shall have duties and
responsibilities consistent with the position set forth above in a company the size and of the
nature of the Company, and such other duties and authority that are assigned to Employee from time
to time by the Company’s Board of Directors (the “Board”), or such other officer of the Company as
shall be designated by the Board. Employee shall report to the Board, or to such other officer of
the Company as shall be designated by the Board. All services that Employee may render to the
Company or any of its Affiliates in any capacity during the Term shall be deemed to be services
required by this Agreement and the consideration for such services is that provided for in this
Agreement.
(b) During the Term, Employee agrees to devote his full business time and attention to the
business and affairs of the Company, unless Employee notifies the Board in advance of Employee’s
intent to engage in other paid work and receives the Board’s express
written consent to do so. Notwithstanding the foregoing, so long as such activities do not
conflict with the Company’s interests, interfere with Employee’s duties and responsibilities or
violate Employee’s obligations hereunder, Employee will not be prohibited from (i) managing his
personal, financial, and legal affairs; (ii) engaging in professional, charitable or community
activities or organizations or (iii) serving on the boards of directors, or advisory boards of
directors, of not-for-profit charitable organizations, not-for-profit professional organizations,
or for-profit corporations, so long as Employee secures the Board’s express written consent for
Employee to serve on such boards prior to undertaking such service.
(c) During the Term, Employee agrees to comply with and, where applicable, enforce the
policies of the Company, including without limitation such policies with respect to legal
compliance, conflicts of interest, confidentiality, professional conduct and business ethics as are
from time to time in effect. Employee shall cooperate with any investigation or inquiry authorized
by the Board or conducted by a governmental authority related to the Company’s or an Affiliate’s
business or the Employee’s conduct related to the Company or an Affiliate.
3. Compensation.
(a) Base Salary. During the Term, Employee’s base salary shall be $275,000 per annum,
which salary may be increased (but not decreased without the Employee’s written consent) by the
Board (or a designated committee thereof) in its discretion (the “Base Salary”), which Base Salary
shall be payable in regular installments in accordance with the Company’s general payroll
practices.
(b) Annual Bonus. During the Term, Employee shall be eligible to receive an annual
performance bonus payment (a “Performance Bonus”) for each calendar year pursuant to an annual cash
performance bonus program (the “Bonus Plan”). Pursuant to the terms of the Bonus Plan, each annual
Performance Bonus shall be payable based on the achievement of reasonable performance targets
established in accordance herewith, and for each calendar year Employee’s target Performance Bonus
shall be equal to 60% of Employee’s annual Base Salary in effect on the last day of the applicable
calendar year (the “Target Performance Bonus”). For each calendar year, the Board and the Employee
will mutually determine and will establish in writing (i) the applicable performance targets, (ii)
the percentage of annual Base Salary payable to Employee if some lesser or greater percentage of
the target annual performance is achieved, and (iii) such other applicable terms and conditions of
the Bonus Plan necessary to satisfy the requirements of Section 409A of the Internal Revenue Code
of 1986, as amended (the “Code”). Except as otherwise provided in Section 5, any Performance Bonus
that Employee becomes entitled to receive (as a result of the applicable performance targets
ultimately being achieved) will be deemed earned on the last day of the calendar year to which such
bonus relates and will be paid to Employee as soon as administratively feasible following
preparation of the Company’s unaudited financial statements for the applicable calendar year, but
in no event later than March 15 of the calendar year following the calendar year to which such
Performance Bonus relates.
(c) Employee Benefits. Employee will be entitled during the Term to receive such
welfare benefits and other fringe benefits (including, but not limited to vacation, financial and
tax planning assistance, medical, dental, life insurance, 401(k) and other employee benefits
and perquisites, such as club membership dues) as the Company may offer from time to time to
similarly situated executive level employees, subject to applicable eligibility requirements. The
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Company shall not, however, by reason of this Section 3(c), be obligated to refrain from changing,
amending, or discontinuing any such benefit plan or program, on a prospective basis, so long as any
such changes are similarly applicable to similarly situated employees of the Company.
(d) Business Expenses. The Company shall reimburse Employee for all reasonable
expenses incurred by him in the course of performing his duties during the Term to the extent
consistent with the Company’s written policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the Company’s requirements with respect to
reporting and documentation of such expenses (“Business Expenses”). Notwithstanding any provision
in this Agreement to the contrary, the amount of Business Expenses for which Employee is eligible
to receive reimbursement during any calendar year shall not affect the amount of Business Expenses
for which Employee is eligible to receive reimbursement during any other calendar year within the
Term. Reimbursement of Business Expenses under this Section 3(d) shall generally be made within
two weeks of Employee’s submission of expense reports pursuant to Company policy, but in no event
later than March 15 of the calendar year following the calendar year in which the expense was
incurred. Employee is not permitted to receive a payment or other benefit in lieu of reimbursement
under this Section 3(d).
(e) Long Term Incentive Compensation. Employee may, as determined by the Board (or a
designated committee thereof) in its sole discretion, periodically receive grants of stock options
or other equity or non-equity related awards pursuant to the Company’s long-term incentive plan(s),
subject to the terms and conditions thereof. Any grants previously awarded to Employee pursuant to
the Company’s long-term incentive plan(s) that are outstanding on the Effective Date hereof shall
continue to be governed by the terms and conditions of such plan(s).
4. Termination of Employment. Unless otherwise agreed to in writing by the Company
and Employee, Employee’s employment hereunder may be terminated under the following circumstances:
(a) Death. Employee’s employment hereunder shall terminate upon his death.
(b) Inability to Perform. Employee’s employment may be terminated by the Company if
Employee has incurred a Disability. For purposes of this Agreement, “Disability” means Employee’s
inability to perform the essential functions of Employee’s position with or without reasonable
accommodation, if required by law, due to physical or mental impairment. The existence of any such
Disability shall be certified by a physician acceptable to both the Company and Employee. If the
parties are not able to agree on the choice of a physician, each party shall select a physician
who, in turn, shall select a third physician to render such certification. In no event will
Employee’s employment be terminated as a result of Disability pursuant to this Section 4(b) until
at least 180 consecutive days of paid leave have elapsed and the Company has provided Employee with
at least thirty days’ advance written notice of termination. During the 180 days of paid leave,
the Company may offset the payment of Employee’s Base Salary then in effect by the amount of any
short-term or long-term disability benefits Employee receives pursuant to Section 3(c) above.
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(c) Termination by the Company. The Company may terminate Employee’s employment with
or without Cause. For purposes of this Agreement, the term “Cause” means Employee (i) has been
convicted of a misdemeanor involving moral turpitude or a felony, (ii) has engaged in grossly
negligent or willful misconduct in the performance of his duties for the Company, which actions
have had a material detrimental effect on the Company, (iii) has breached any material provision of
this Agreement, (iv) has engaged in conduct which is materially injurious to the Company
(including, without limitation, misuse or misappropriation of the Company’s funds or other
property), or (v) has committed an act of fraud, provided, however, that the Company must give
Employee written notice of the acts or omissions constituting Cause within 60 days after an officer
of the Company (other than Employee) first learns of the occurrence of such event, and no
termination shall be for Cause under clauses (ii), (iii), (iv), or (v) contained in this Section
4(c) unless and until Employee fails to cure such acts or omissions within 30 days following
receipt of such written notice.
(d) Termination by Employee. Employee may, upon giving the Company no less than 30
days’ advance written notice, terminate Employee’s employment without Good Reason or for Good
Reason. For purposes of this Agreement, the term “Good Reason” shall mean, without the express
written consent of Employee, the occurrence of one of the following arising on or after the
Effective Date, as determined in a manner consistent with Treasury Regulation § 1.409A-1(n)(2)(ii):
(i) a material reduction in Employee’s base compensation, (ii) a material diminution in Employee’s
authority, duties or responsibilities, (iii) a permanent relocation in the geographic location at
which Employee must perform services to a location more than 50 miles from the location at which
Employee normally performed services immediately before the relocation; (iv) a material reduction
in the authority, duties, or responsibilities of the person to whom Employee reports; or (v) any
other action or inaction that constitutes a material breach by the Company of this Agreement.
Neither a transfer of employment among the Company and any of its Affiliates nor the Company or an
Affiliate entering into a co-employer relationship with a personnel services organization
constitutes Good Reason. In the case of Employee’s allegation of Good Reason, (A) Employee shall
provide notice to the Company of the event alleged to constitute Good Reason within 60 days after
the occurrence of such event, and (B) the Company shall have the opportunity to remedy the alleged
Good Reason event within 30 days from receipt of notice of such allegation. If not remedied within
that 30-day period, Employee may submit a Notice of Termination pursuant to Section 5(e), provided
that the Notice of Termination must be given no later than 100 days after the expiration of such 30
day period; otherwise, Employee is deemed to have accepted such event, or the Company’s remedy of
such event, that may have given rise to the existence of Good Reason; provided, however, such
acceptance shall be limited to the occurrence of such event and shall not waive Employee’s right to
claim Good Reason with respect to future similar events.
(e) Investigation; Suspension. The Company may suspend Employee with pay pending an
investigation authorized by the Company or a governmental authority or a determination by the
Company whether Employee has engaged in acts or omissions constituting Cause, and such paid
suspension shall not constitute Good Reason or a termination of this Agreement or Employee’s
employment.
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5. Compensation Upon Termination.
(a) For Cause or Without Good Reason. In the event Employee’s employment is
terminated by the Company for Cause or by the Employee without Good Reason, the Company shall pay
to Employee (i) any unpaid portion of the Base Salary through the Date of Termination at the rate
then in effect, (ii) any unpaid Performance Bonus earned in the calendar year prior to the Date of
Termination, (iii) unreimbursed Business Expenses through the Date of Termination, and (iv) such
employee benefits, if any, as to which Employee may be entitled pursuant to the terms governing
such benefits. The amounts, if any, set forth in (i), (ii), (iii), and (iv) shall be collectively
referred to herein as the “Accrued Payments”. The Accrued Payments shall be paid at the time and
in the manner required by applicable law but in no event later than 30 business days after the Date
of Termination, with the exception of (ii), which shall be paid at the time provided in and in
accordance with Section 3(b).
(b) Without Cause or For Good Reason. In addition to the Accrued Payments, in the
event Employee’s employment is terminated by the Company without Cause or by Employee for Good
Reason and such termination constitutes a “separation from service” (as defined in Section 5(i)),
the Company shall pay to Employee a pro-rata portion of the Performance Bonus that Employee would
have been entitled to receive pursuant to Section 3(b) hereof for the calendar year of termination,
multiplied by a fraction, the numerator of which is the number of days during which Employee was
employed by the Company in the calendar year of Employee’s termination, and the denominator of
which is 365 (the “Pro-Rata Bonus”), payable as soon as administratively feasible following
preparation of the Company’s unaudited financial statements for the applicable calendar year, but
in no event later than March 15 of the calendar year following the calendar year to which such
Performance Bonus relates. In addition, the Company shall provide Employee with the following (the
"Severance Package”), contingent upon Employee satisfying the Severance Conditions, as defined
below:
(i) Payment of an amount (the “Separation Payment”) equal to the greater of either (1)
the aggregate amount of Base Salary as of the Date of Termination or, if greater, before any
reduction not consented to by Employee, that would have been paid to Employee if he had
continued performing services pursuant to this Agreement for the remainder of the
then-current Term or (2) the equivalent of twelve months of Employee’s Base Salary as of the
Date of Termination or, if greater, before any reduction not consented to by Employee,
payable at the time and in the manner provided in this Section 5(b) below; plus
(ii) Pay or reimburse on a monthly basis the premiums required to continue Employee’s
group health care coverage for a period of 18 months following Employee’s Date of
Termination, under the applicable provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”), provided that Employee elects to continue and remains
eligible for these benefits under COBRA; plus
(iii) (A) if the Date of Termination occurs during the Initial Term, an amount equal to
the aggregate of each Target Performance Bonus that Employee would
have been eligible to receive if he had continued performing services pursuant to this
Agreement for the remainder of the then-current Term, calculated based on Employee’s
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Base Salary in effect on the Date of Termination or, if greater, before any reduction not
consented to by Employee or (B) if the Date of Termination occurs during any Extension Term,
an amount equal to 60% of the aggregate amount of Base Salary as of the Date of Termination
or, if greater, before any reduction not consented to by Employee, that would have been paid
to Employee if he had continued performing services pursuant to this Agreement for the
remainder of the then-current Term, minus any Pro-Rata Bonus received by the Employee
pursuant to section 5(b) above, payable as soon as administratively feasible following
preparation of the Company’s unaudited financial statements for the applicable calendar
year, but in no event later than March 15 of the calendar year following the calendar year
to which such Target Performance Bonus relates; plus
(iv) immediate vesting of all unvested equity awards under the Company’s 2010 Long Term
Incentive Plan or other plans of the Company as of the Date of Termination, regardless of
any other established vesting schedule, such that all remaining unvested equity awards shall
be fully vested on the Date of Termination.
To receive the Severance Package, Employee must execute and return to the Company on or prior to
the 60th day following the Date of Termination a waiver and release of claims agreement in the
Company’s customary form, which shall exclude claims for indemnification, claims for coverage under
officer and director policies, and claims as a stockholder of the Company and which may be amended
by the Company to reflect changes in applicable laws and regulations (the “Release”), and where
applicable, not timely revoke such Release (the “Severance Conditions”).
The Separation Payment shall be paid as follows:
(A) If the Separation Payment is greater than the Section 409A Exempt Amount (defined below),
then –
(1) the Section 409A Exempt Amount shall be paid in substantially equal monthly installments
over a period of twelve (12) months beginning on the first payroll date which occurs on or after
the 60th day following the Date of Termination, and
(2) the excess of the Separation Payment over the Section 409A Exempt Amount shall be paid in
a single lump sum no later than 60 days after the Date of Termination.
For purposes of this Agreement, the “Section 409A Exempt Amount” is two times the lesser of (x)
Employee’s annualized compensation based upon the annual rate of pay for services provided to the
Company for the calendar year preceding the calendar year in which Employee has a “separation from
service” (as defined in Section 5(i)) with the Company (adjusted for any increase during that year
that was expected to continue indefinitely if Employee had not separated from service) or (y) the
maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17)
of the Code for the year in which Employee has a separation from service.
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(B) If the Separation Payment is equal to or less than the Section 000X Xxxxxx Xxxxxx, then
the Separation Payment shall be paid in equal monthly installments over a period of months (limited
to 24 such months) determined by dividing (x) the Separation Payment by (y) the Employee’s Monthly
Base Salary as of the Date of Termination, commencing in payment on the first day of the third
month following the Date of Termination, provided that the Date of Termination constitutes a
“separation from service” (as defined in Section 5(i)).
(c) Death or Disability. In the event Employee’s employment terminates by reason of
his death or Disability, Employee (or his estate) shall be entitled to receive:
(i) the Accrued Payments;
(ii) a Pro-Rata Bonus for the calendar year of termination, payable as soon as
administratively feasible following preparation of the Company’s unaudited financial
statements for the applicable calendar year, but in no event later than March 15 of the
calendar year following the calendar year to which such Performance Bonus relates; and
(iii) provided Employee satisfies the Severance Conditions, (1) an amount equivalent to
twelve (12) months of Employee’s Base Salary as of the Date of Termination, or, if greater,
before any reduction not consented to by Employee, payable in a lump sum within 60 days of
the Date of Termination; and (2) pay or reimburse on a monthly basis the premiums required
to continue Employee’s group health care coverage for a period of 18 months following
Employee’s Date of Termination, under the applicable provisions of COBRA, provided that
Employee or his dependents, as applicable, elect to continue and remain eligible for these
benefits under COBRA.
(d) Exclusive Compensation and Benefits. The compensation and benefits described in
this Section 5 or in Section 6 as applicable, along with the associated terms for payment,
constitute all of the Company’s obligations to Employee with respect to the termination of
Employee’s employment. Nothing in this Agreement, however, is intended to limit any earned, vested
benefits (other than any entitlement to severance or separation pay, if any) that Employee may have
under the applicable provisions of any benefit plan of the Company in which Employee is
participating on the Date of Termination, any rights Employee may have to continue or convert
coverage under certain employee benefit plans in accordance with the terms of those plans and
applicable law, or any rights Employee may have under long-term incentive or equity compensation
plan.
(e) Notice of Termination. Any termination of Employee’s employment occurring in
accordance with the terms of this Section 5 (other than by reason of Employee’s death) shall be
communicated to the other party by written notice that (i) indicates the specific termination
provisions of this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for the termination, and (iii) specifies the Date of
Termination (a “Notice of Termination”), and that is delivered to the other party in accordance
with Section 9(i) of this Agreement.
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(f) Date of Termination. For purposes of this Agreement, “Date of Termination” means
the date of receipt of the Notice of Termination or any later date specified therein, as the case
may be; provided, however that if Employee’s employment is terminated by reason of his death, the
Date of Termination shall be the date of death of Employee.
(g) Deemed Resignations. Unless otherwise agreed to in writing by the Company and
Employee prior to termination of Employee’s employment, any termination of Employee’s employment
shall constitute an automatic resignation of Employee from all positions he then holds as an
employee, officer, director, manager or other service provider of the Company and each Affiliate of
the Company.
(h) Offset. Employee agrees that the Company may set off against, and Employee
authorizes the Company to deduct from, any payments due to Employee, or to his estate, heirs, legal
representatives, or successors, any amounts which may be due and owing to the Company or an
Affiliate by Employee, whether arising under this Agreement or otherwise; provided that no such
offset may be made with respect to amounts payable that are subject to the requirements of Section
409A of the Code unless the offset would not result in a violation of the requirements of Section
409A of the Code.
(i) Application of Section 409A. The amounts payable pursuant to Sections 5 and 6 of
this Agreement are intended to comply with the short-term deferral exception and/or separation pay
exception to Section 409A of the Code. Notwithstanding the foregoing, no amount payable pursuant
to this Agreement which constitutes a “deferral of compensation” within the meaning of the Treasury
Regulations issued pursuant to Section 409A of the Code (the “Section 409A Regulations”) shall be
paid unless and until Employee has incurred a “separation from service” within the meaning of the
Section 409A Regulations. Furthermore, to the extent that Employee is a “specified employee”
within the meaning of the Section 409A Regulations as of the date of Employee’s separation from
service, no amount that constitutes a deferral of compensation which is payable on account of
Employee’s separation from service shall be paid to Employee before the date (the “Delayed Payment
Date”) which is first day of the seventh month after the date of Employee’s separation from service
or, if earlier, the date of Employee’s death following such separation from service. All such
amounts that would, but for this Section 5(i), become payable prior to the Delayed Payment Date
will be accumulated and paid on the Delayed Payment Date. No interest will be paid by the Company
with respect to any such delayed payments. For purposes of Section 409A of the Code, each payment
or amount due under this Agreement shall be considered a separate payment, and Employee’s
entitlement to a series of payments under this Agreement is to be treated as an entitlement to a
series of separate payments.
6. Change in Control.
(a) Upon the occurrence of a Change in Control (as defined in the Company’s 2010 Long Term
Incentive Plan) during the Term, all unvested equity awards under the Company’s 2010 Long Term
Incentive Plan or other plans of the Company as of such date shall become immediately vested,
regardless of any other established vesting schedule, such that all
remaining unvested equity awards shall be fully vested on the date of such Change in Control.
In addition, if a Change in Control occurs during the Term and (x) Employee is terminated by the
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Company for any reason other than for Cause within one year following such Change in Control or (y)
Employee terminates employment for Good Reason within one year following such Change in Control,
and any such termination constitutes a separation from service (as defined in Section 5(i)), then,
the Company shall:
(i) Pay Employee within 60 days following the Date of Termination, a lump sum payment
equal to two (2) times the sum of (i) Employee’s annual rate of Base Salary as of the Date
of Termination or, if greater, before any reduction not consented to by Employee, plus (ii)
(A) if the Date of Termination occurs during the Initial Term, the maximum Performance Bonus
Employee is eligible to receive for the calendar year in which the Change in Control occurs
or (B) if the Date of Termination occurs during any Extension Term, Employee’s Target
Performance Bonus, calculated based on Employee’s Base Salary as of the Date of Termination
or, if greater, before any reduction not consented to by Employee; plus
(ii) pay or reimburse on a monthly basis the premiums required to continue Employee’s
group health care coverage for a period of 18 months following Employee’s separation date,
under COBRA, provided that Employee elects to continue and remains eligible for these
benefits under COBRA.
provided, that, nothing in this Section 6 shall relieve the Company or any successor-in-interest
thereof of its obligation to continue, following any Change in Control, to provide Employee with
the compensation due pursuant to Section 3 of this Agreement or to otherwise comply with its
obligations hereunder in the event Employee’s service continues pursuant to this Agreement
following the occurrence of such Change in Control; provided, further, that, in the event Employee
is terminated simultaneously with the occurrence of a Change in Control or within one year thereof,
Employee shall be entitled to receive the greater of the payments or benefits provided under
Section 5(b) of this Agreement and this Section 6(a), which receipt shall be conditioned upon
Employee’s satisfaction of the Severance Conditions.
(b) In the event it shall be determined that any payment, benefit or distribution (or
combination thereof) by the Company or any of its wholly-owned subsidiaries or any other affiliate
(as that term is used in Treas. Reg. § 1.280G-1, Q/A-46) to or for the benefit of Employee (whether
paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a “Payment”) is subject to the excise tax imposed by Section 4999 of the Code, or any
interest and penalties are incurred by Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, hereinafter collectively referred to as the “Excise
Tax”), Employee shall be entitled to receive, in accordance with Exhibit A hereof, an
additional payment (a “Gross-Up Payment”) in an amount such that after payment by Employee of all
taxes (including any interest or penalties imposed with respect to such taxes), including, without
limitation, any federal, state and local income taxes and employment taxes (and any interest and
penalties imposed with respect thereto) and the Excise Tax imposed upon the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
Notwithstanding the foregoing provisions of this Section 6(b), if it is determined that
Employee is entitled to a Gross-Up Payment, but that the value of the Parachute Payments
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(as defined below) does not exceed 110% of the Safe Harbor Amount (as defined below), then no
Gross-Up Payment shall be made to Employee and the Payments, in the aggregate, will be reduced to
the Safe Harbor Amount. The reduction of the Payments to the Safe Harbor Amount will be made in
the following order:
(i) First, by reducing the cash amounts of Parachute Payments that would not constitute
deferred compensation (within the meaning of Section 409A of the Code) subject to Section
409A of the Code (with the Payments subject to such reduction to be determined by Employee),
to the extent necessary to decrease the Payments that would otherwise constitute Parachute
Payments to the Safe Harbor Amount.
(ii) Next, if after the reduction to zero of the amounts described in paragraph (i)
above, the remaining scheduled Parachute Payments are greater than the Safe Harbor Amount,
then by reducing the cash amounts of Payments that constitute deferred compensation (within
the meaning of Section 409A of the Code) subject to Section 409A of the Code, with the
reductions to be applied first to the Payments scheduled for the latest distribution date,
and then applied to distributions scheduled for progressively earlier distribution dates, to
the extent necessary to decrease the Payments that would otherwise constitute Parachute
Payments to the Safe Harbor Amount.
(iii) Next, if after the reduction to zero of the amounts described in paragraphs (i)
and (ii) above, the remaining scheduled Parachute Payments are greater than the Safe Harbor
Amount, then, by reducing any of the remaining scheduled Payments, in an order to be
determined by the Company, to the extent necessary to decrease the Payments that would
otherwise constitute Parachute Payments to the Safe Harbor Amount.
The term “Parachute Payment” is the portion of the Payments that would be treated as parachute
payments under Section 280G of the Code. The “Safe Harbor Amount” is the maximum amount of
Payments that could be made to Employee without giving rise to any Excise Tax.
7. Protection of Information.
(a) Disclosure to and Property of the Company. All information, trade secrets,
designs, ideas, concepts, improvements, product developments, discoveries and inventions, whether
patentable or not, that are conceived, made, developed or acquired by Employee, individually or in
conjunction with others, during the term of his employment (whether during business hours or
otherwise and whether on the Company’s premises or otherwise) that relate to the Company’s or any
of its wholly-owned subsidiaries’ business, products or services and all writings or materials of
any type embodying any such matters (collectively, “Confidential Information”) shall be disclosed
to the Company, and are and shall be the sole and exclusive property of the Company. Confidential
Information does not, however, include any information that is available to the public other than
as a result of any unauthorized act of Employee.
(b) No Unauthorized Use or Disclosure. Employee agrees that Employee will preserve
and protect the confidentiality of all Confidential Information and work product of the Company and
its wholly-owned subsidiaries, and will not, at any time during or after the
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termination of Employee’s employment with the Company, make any unauthorized disclosure of,
and shall not remove from the Company premises, and will use reasonable efforts to prevent the
removal from the Company premises of, Confidential Information or work product of the Company or
its wholly-owned subsidiaries, or make any use thereof, in each case, except in the carrying out of
Employee’s responsibilities hereunder. Employee shall have no obligation hereunder to keep
confidential any Confidential Information if and to the extent disclosure thereof is specifically
required by law; provided, however, that in the event disclosure is required by applicable law and
Employee is making such disclosure, Employee shall provide the Company with prompt notice of such
requirement, and shall use commercially reasonable efforts to give such notice prior to making any
disclosure so that the Company may seek an appropriate protective order.
(c) Remedies. Employee acknowledges that money damages would not be a sufficient
remedy for any breach of this Section 7 by Employee, and the Company or its wholly-owned
subsidiaries shall be entitled to enforce the provisions of this Section 7 by obtaining an order
for specific performance and/or injunctive relief as remedies for any such breach or threatened
breach, including but not limited to an order terminating payments owing to Employee under this
Agreement. Such remedies shall not be deemed the exclusive remedies for a breach of this Section
7, but shall be in addition to all remedies available at law or in equity to the Company, including
the recovery of damages from Employee and remedies available to the Company pursuant to other
agreements with Employee.
(d) No Prohibition. Nothing in this Section 7 shall be construed as prohibiting
Employee, following the termination of the Prohibited Period (as defined below), from being
employed by any Competing Business (as defined below) or engaging in any Prohibited Activity (as
defined below); provided, that during such employment or engagement Employee complies with his
obligations under this Section 7.
8. Non-Competition and Non-Solicitation.
(a) Definitions. As used in this Agreement, the following terms shall have the
following meanings:
(i) “Affiliate” shall mean an individual or entity that, directly or indirectly through
one or more intermediaries, controls or is controlled by or is under common control with a
specified individual or entity.
(ii) “Competing Business” means any business, individual, partnership, firm,
corporation or other entity engaged in oil and gas exploration and production.
(iii) “Prohibited Activity” means any service or activity on behalf of a Competing
Business that involves the planning, management, supervision, or providing of services that
are substantially similar to those services Employee provided to the Company within the last
12 months of Employee’s employment with the Company.
(iv) “Prohibited Period” means the Term and the 12 month period following the
termination of Employee’s employment with the Company.
11
(v) “Restricted Area” means any area within a six (6) mile radius of the boundary of
any existing leasehold or other property of the Company or its Affiliates, either during the
Term or as of the Employee’s Date of Termination. The parties stipulate that the forgoing
is a reasonable area restriction because the area identified is the market area with respect
to which Employee will help the Company provide its products and services, help analyze,
and/or receive access to Confidential Information.
(b) Protective Covenants and Restrictions. Acknowledging delivery of Confidential
Information and that such Confidential Information is vital to Employee’s continued performance of
services to the Company and acknowledging that the Company is delivering and will deliver the
Confidential Information partly in reliance on the protective covenants and restrictions set forth
herein, Employee agrees that the following protective covenants are reasonable and necessary for
the protection of the Company’s legitimate business interests, do not create any undue hardship on
Employee, and are not contrary to the public interest:
(i) Non-compete. Employee expressly covenants and agrees that, during the
Prohibited Period, he will not engage in any Prohibited Activity in the Restricted Area.
Notwithstanding the foregoing, in the event Employee resigns his employment or is
terminated, for any reason, on or after a Change in Control, Employee shall have no
obligations to comply with this Section 8(b)(i).
(ii) Non-solicitation. Employee further expressly covenants and agrees that
during the Prohibited Period, he will not (A) solicit any individual who, on the Date of
Termination, is an employee of the Company, to leave such employment, provided that Employee
will not be deemed to have violated this provision if employees of the Company directly
contact Employee regarding employment or respond to general advertisements for employment,
or (B) solicit any client or customer of the Company, with whom Employee has had direct
contact with, to terminate or modify its relationship with Company that exists on the Date
of Termination. Notwithstanding the foregoing, in the event Employee resigns his employment
or is terminated, for any reason, on or after a Change in Control, Employee shall have no
obligations to comply with this Section 8(b)(ii).
(c) Permitted Ownership. Notwithstanding any of the foregoing, Employee shall not be
prohibited from owning 2.5% or less of the outstanding equity securities of any entity whose equity
securities are listed on a national securities exchange or publicly traded in any over-the-counter
market, provided that neither Employee nor any of his Affiliates, together or alone, has the power,
directly or indirectly, to control or direct or is involved in the management or affairs of any
such corporation that is a Competing Business.
(d) Reasonableness. Employee and the Company agree and acknowledge that the
limitations as to time, geographical area and scope of activity to be restrained as set forth in
this Section 8 are the result of arm’s-length bargaining, are fair and reasonable, and do not
impose any greater restraint than is necessary to protect the legitimate business interests of the
Company in light of (i) the nature and geographic scope of the Company’s operations; (ii)
Employee’s level of control over and contact with the Company’s business in the Restricted
12
Area; (iii) the fact that the Company’s business is conducted throughout the Restricted Area; and
(iv) the amount of compensation that Employee is receiving in connection with the performance of
his duties hereunder.
(e) Relief and Enforcement. Employee hereby represents to the Company that he has
read and understands, and agrees to be bound by, the terms of this Section 8. It is the desire and
intent of the parties hereto that the provisions of this Section 8 be enforced to the fullest
extent permitted under applicable law, whether now or hereafter in effect. However, to the extent
that any part of this Section 8 may be found invalid, illegal or unenforceable for any reason, it
is intended that such part shall be enforceable to the extent that a court of competent
jurisdiction shall determine that such part, if more limited in scope, would have been enforceable,
and such part shall be deemed to have been so written and the remaining parts shall as written be
effective and enforceable in all events. Employee and the Company further agree and acknowledge
that, in the event of a breach or threatened breach of any of the provisions of this Section 8, the
Company shall be entitled to immediate injunctive relief, as any such breach would cause the
Company irreparable injury for which it would have no adequate remedy at law. Nothing herein shall
be construed so as to prohibit the Company from pursuing any other remedies available to it
hereunder, at law or in equity, for any such breach or threatened breach.
9. General Provisions.
(a) Amendments and Waiver. Other than pursuant to Section 4(d), (i) the terms and
provisions of this Agreement may not be modified or amended, nor may any of the provisions hereof
be waived, temporarily or permanently, unless such modification or amendment is agreed to in
writing and signed by Employee and by a duly authorized officer of the Company, and such waiver is
set out in writing and signed by the party to be bound by waiver, and (ii) the failure of any party
to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms, and a waiver on one occasion shall not be
deemed to be a waiver of the same or any other type of breach on a future occasion.
(b) Withholding and Deductions. With respect to any payment to be made to Employee,
the Company shall deduct, where applicable, any amounts authorized by Employee, and shall withhold
and report all amounts required to be withheld and reported by applicable law.
(c) Mitigation. Employee shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of
any payment provided for in this Agreement be reduced by any compensation earned by Employee as the
result of employment by another employer after the Date of Termination, or otherwise.
(d) Survival. The termination of Employee’s employment shall not impair the rights or
obligations of any party that have accrued prior to such termination or which by their nature or
terms survive termination of the Term, including without limitation the Company’s obligations under
Sections 5 and 6 and Employee’s obligations under Sections 7 and 8.
13
(e) No Obligation to Pay. With regard to any payment due to Employee under this
Agreement, it shall not be a breach of any provision of this Agreement for the Company to fail to
make such payment to Employee if by doing so, the Company violates applicable law.
(f) Validity. The invalidity or unenforceability of any provision or provisions of
this Agreement shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
(g) Entire Agreement. This Agreement constitutes the entire agreement of the parties
with regard to the subject matter hereof, and contains all the covenants, promises,
representations, warranties and agreements between the parties with respect to employment of
Employee by the Company. Without limiting the scope of the preceding sentence, all understandings
and agreements preceding the date of execution of this Agreement and relating to the subject matter
hereof are hereby null and void and of no further force and effect.
(h) Successors and Assigns; Binding Agreement. This Agreement shall bind and inure to
the benefit of and be enforceable by the parties hereto and their respective successors, permitted
assigns, heirs and personal representatives and estates, as the case may be. Neither this
Agreement nor any right or obligation hereunder of any party may be assigned or delegated without
the prior written consent of the other party hereto; provided, however, that the Company may assign
this Agreement to any of its Affiliates and Employee may direct payment of any benefits that will
accrue upon death. Employee shall not have any right to pledge, hypothecate, anticipate, or in any
way create a lien upon any payments or other benefits provided under this Agreement; and no
benefits payable under this Agreement shall be assignable in anticipation of payment either by
voluntary or involuntary acts, or by operation of law, except by will or pursuant to the laws of
descent and distribution. This Agreement shall not confer any rights or remedies upon any person
or legal entity other than the parties hereto and their respective successors and permitted
assigns.
(i) Notices. For purposes of this Agreement, notices and all other communications
provided for herein shall be in writing and shall be deemed to have been duly given (i) when
received, if delivered personally or by courier, (ii) on the date receipt is acknowledged, if
delivered by certified mail, postage prepaid, return receipt requested, or (iii) one day after
transmission, if sent by facsimile transmission with confirmation of transmission, as follows:
| If to Employee, at: | ||||||
| If to the Company, at: | Oasis Petroleum Inc. | |||||
| Attn: | ||||||
| 0000 Xxxxxx Xxxxxx, Xxxxx 000 | ||||||
| Xxxxxxx, Xxxxx 00000 |
14
or to such other address as either party may furnish to the other in writing in accordance
herewith, except that notices or changes of address shall be effective only upon receipt.
(j) Construction. Where specific language is used to clarify by example a general
statement contained herein, such specific language shall not be deemed to modify, limit or restrict
in any manner the construction of the general statement to which it relates. The language used in
this Agreement shall be deemed to be the language chosen by the parties to express their mutual
intent, and no rule of strict construction shall be applied against any party. The section
headings in this Agreement are for convenience of reference only, and they form no part of this
Agreement and shall not affect its construction.
(k) Assistance in Litigation. During the Term and for a period of four years
following the Date of Termination, Employee shall, if given at least two (2) weeks notice, furnish
such information and proper assistance to the Company or any of its Affiliates as may reasonably be
required by the Company in connection with any litigation, investigations, arbitrations, and/or any
other fact-finding or adjudicative proceedings involving the Company or any of its Affiliates,
provided that if such assistance is requested after the Date of Termination: (i) such assistance
not unreasonably interfere with Employee’s employment or other activities or endeavors; and (ii)
such assistance not exceed forty hours in any twelve month period, unless otherwise agreed in
writing by the parties. This obligation shall include, without limitation, to meet with counsel
for the Company or any of its Affiliates and provide truthful testimony at the request of the
Company or as otherwise required by law or valid legal process. The Company shall reimburse
Employee for all reasonable out-of-pocket expenses incurred by Employee and approved in advance by
the Company in rendering such assistance (such as travel, parking, and meals but not attorney’s
fees). In addition, following the Date of Termination, the Company shall pay the Employee $300/hr
for his time in providing information and assistance in accordance with this Section 9(k).
(l) Governing Law; Construction; Venue; Jury-Trial Waiver. The parties (i) agree that
this Agreement is governed by and shall be construed and enforced in accordance with Texas law,
excluding its choice-of-law principles, except where federal law may preempt the application of
state law; (ii) agree that this Agreement is to be construed as a whole, according to its fair
meaning, and not strictly for or against any of the parties; (iii) submit and consent to the
exclusive jurisdiction, including removal jurisdiction, of the state and federal courts located in
Xxxxxx County, Texas (or the county where the Company’s principal executive offices are located if
different) for any action or proceeding relating to this Agreement or Employee’s employment; (iv)
waive any objection to such venue; (v) agree that any judgment in any such action or proceeding may
be enforced in other jurisdictions; and (vi) irrevocably waive the right to trial by jury and agree
not to ask for a jury in any such proceeding.
(m) Mutual Contribution. The parties to this Agreement have mutually contributed to
its drafting. Consequently, no provision of this Agreement shall be construed against any party on
the grounds that such party drafted the provision or caused it to be drafted.
15
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the
Effective Date.
| OASIS PETROLEUM INC. |
||||
| By: | /s/ Xxxxxx X. Xxxx | |||
| Name: | Xxxxxx X. Xxxx | |||
| Title: | President and Chief Executive Officer | |||
| EMPLOYEE: |
||||
| /s/ Xxxxxx L. Xxxx | ||||
| Xxxxxx X. Xxxx | ||||
EXHIBIT A
GROSS-UP PAYMENT
This Exhibit A shall govern the Gross-Up Payment described in Section 6 of the Agreement.
Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such
terms in the Agreement.
Section 1. All determinations required to be made under this Exhibit A, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment, whether a
reduction to the Safe Harbor Amount is required and, if so, the amount of the reduction, and the
assumptions to be utilized in arriving at such determination, shall be made by a nationally
recognized accounting firm designated by the Company (the “Accounting Firm”), which shall provide
detailed supporting calculations both to the Company and Employee within ten (10) business days of
the receipt of notice from Employee that there has been a Payment, or such earlier time as is
requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to this Exhibit A, shall be paid
by the Company to Employee (or to the appropriate taxing authority on Employee’s behalf) when the
tax is due. If the Accounting Firm determines that no Excise Tax is payable by Employee, it shall
so indicate to Employee in writing. Any determination by the Accounting Firm shall be binding upon
the Company and Employee (subject to Section 2 hereof). As a result of the uncertainty in the
application of Section 4999 of the Code, it is possible that Gross-Up Payments determined by the
Accounting Firm to be due to (or on behalf of) Employee was lower than the amount actually due
(“Underpayment”). In the event that the Company exhausts its remedies pursuant to Section 2 of this
Exhibit A and Employee thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred, and any such
Underpayment shall be promptly paid by the Company to or for the benefit of Employee (but in any
case no later than the calendar year following the calendar year in which such tax was payable).
Section 2. Employee shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of any Gross-Up Payment. Such
notification shall be given as soon as practicable but no later than ten (10) business days after
Employee is informed in writing of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. Employee shall not pay such claim
prior to the expiration of the thirty (30) day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies Employee in writing prior to the expiration
of such period that it desires to contest such claim, Employee shall (i) give the Company any
information reasonably requested by the Company relating to such claim, (ii) take such action in
connection with contesting such claim as the Company shall reasonably request in writing from time
to time, including, without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith
in order to effectively contest such claim, and (iv) permit the Company to participate in any
proceedings relating to such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred in connection with
such contest and shall indemnify and hold Employee
Exhibit A
1
harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties
with respect thereto) imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 2, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct Employee to pay the tax claimed
and xxx for a refund or contest the claim in any permissible manner, and Employee agrees to
prosecute such contest to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one (1) or more appellate courts, as the Company shall determine; provided that
if the Company directs Employee to pay such claim and xxx for a refund, the Company shall advance
the amount of such payment to Employee, on an interest-free basis, and shall indemnify and hold
Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with respect to any imputed
income with respect to such advance; provided, further, that if Employee is required to extend the
statute of limitations to enable the Company to contest such claim, Employee may limit this
extension solely to such contested amount. The Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and Employee shall be
entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
Section 3. If, after the receipt by Employee of an amount paid or advanced by the Company pursuant
to this Exhibit A, Employee becomes entitled to receive any refund with respect to a
Gross-Up Payment, Employee shall (subject to the Company’s complying with the requirements of
Section 2 of this Exhibit A) promptly pay to the Company the amount of such refund received
(together with any interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by Employee of an amount advanced by the Company pursuant to Section 2 of this Exhibit
A, a determination is made that Employee shall not be entitled to any refund with respect to
such claim, and the Company does not notify Employee in writing of its intent to contest such
denial of refund prior to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid, and the amount of such advance
shall offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.
Section 4. For the avoidance of doubt, all payments to or for the benefit of Employee provided for
in this Exhibit A shall be made no later than the end of the calendar year in which the
applicable Excise Tax has become due, or if as a result a tax audit or litigation, it is determined
that no additional Excise Tax has become due, the end of the calendar year in which the audit is
completed or there is a final and non-appealable settlement or other resolution.
Exhibit A
2
