By Michael T Cronin Esq Johnson Pope Bokor Ruppel amp Burns LLP 911 Chestnut Street Clearwater FL 33756 Phone 727 4611818 Fax 727 4620365 Email mikecjpfirmcom Terms of an Executive Employment Agreement ID: 651169
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Slide1
Executive Employment Agreement Checklist
By: Michael T. Cronin, Esq.
Johnson, Pope, Bokor, Ruppel & Burns, LLP
911 Chestnut Street
Clearwater, FL 33756
Phone: (727) 461-1818
Fax: (727) 462-0365
Email: mikec@jpfirm.comSlide2
Terms of an Executive Employment Agreement Checklist
The terms of an executive employment agreement often result from thorough negotiations between the executive and the employer. However, before the negotiation process begins, the employer should consider its position on the provisions below.
The Term of the Agreement
The
beginning date of the agreement
.
Whether
the term should:
◦
be
fixed;
◦
be
indefinite; or
◦
automatically
renew
.
The
expiration date of the agreement.Slide3
Executive's Position and Duties
The
executive's title
.
The
executive's duties
.
The
person (identified by position) or entity to whom the executive must report.
Whether
the executive may be expected to serve on the company's board of directors (if elected) and any of its committees
.
Whether
the executive may be required to provide services to the employer's affiliates for no additional compensation
.
The
scope of any outside activities that the executive may be permitted to engage in (for example, service on boards of directors of other corporations or non-profit entities
).Slide4
Compensation and BenefitsDetermine the executive's starting annual rate of base salary and whether it will be subject to automatic or discretionary increases or adjustments each year
.
Decide whether the agreement should include
:
The
way the executive's bonus will be earned, including
:
◦
whether
the bonus is earned annually or over some other time period
;
◦
whether
the bonus is discretionary, guaranteed or performance-based
;
◦
provisions
consistent with the requirements for performance-based compensation under
Section 162(m)
of the
Internal Revenue Code
;
and
◦
amounts
for a target bonus, threshold bonus, maximum bonus or guaranteed bonus.Slide5
A signing bonus, including:
◦
the
amount;
◦
the
payment date;
◦
any
applicable vesting periods; and
◦
any
circumstances under which the executive must repay the signing bonus
.
Equity
awards and specific terms and conditions for the equity awards granted under the agreement
.
Any
perquisites (or perks) or employee benefits
.
Reimbursement
for legal fees the executive incurs in negotiating the employment agreement
.
Indemnification
, including coverage by directors' and officers' liability insurance
.Slide6
Payments and Benefits on Termination of EmploymentConsider the type and amount of severance or other termination benefits the employer intends to offer the executive on each termination event.
Potential Termination
Events
Termination of employment
:
On
the executive's death.
On
the executive's disability
.
By
the employer with or without cause
.
By
the executive for good reason or in the absence of good reason
.
Because
the employer or the executive does not renew the agreement
.
Depending on which events trigger the employer’s severance obligations, also consider how to define:
Cause.
Disability.
Good
reason
.Slide7
Restrictive Covenants
Consider
the duration and scope of the
:
◦
non-compete;
◦
non-solicitation
of employees restriction; and
◦
non-solicitation
of customers or clients restriction
.
Specify
confidentiality requirements and intellectual property rights
.
Consider
whether any non-disparagement restriction should apply to
:
◦
the
executive only; or
◦
the
executive and the employer
.
Determine
which state law should govern the agreement and whether the desired duration and scope for each restriction are enforceable under applicable state law
.
Enforcement
Determine
whether any disputes arising under the agreement should be settled by
arbitration
.
Consider
whether to provide the executive with reimbursement for legal fees incurred in any actions enforcing the agreement, including any internal requirements the executive must satisfy to receive reimbursement
.Slide8
Design Considerations
Confirm
that all compensation arrangements are structured to comply with or be excluded from the requirements of
Section 409A
.
Consider
whether the terms of the agreement are structured to maximize the employer's ability to deduct compensation expenses under IRC
Section 162(m)
.
Consider
whether to include a clawback provision. If so, also consider
:
◦
the
types of compensation subject to the clawback provision; and
◦
the
circumstances under which the clawback provision applies
.
Confirm
that incentive compensation structures do not encourage inappropriate
risk-taking.
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