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Severance Agreement

Severance Agreement

 

Statement of Agreement

 

SEVERANCE AGREEMENT 

This Severance Agreement (the “Agreement”) is made as of [DATE] between [COMPANY] with its principal place of business located at [COMPANY PLACE OF BUSINESS] (the "Company") and [EXECUTIVE NAME], located at [EXECUTIVE PLACE OF RESIDENCE] (the "Executive"), (sometimes collectively referred to as the "Parties").

In consideration of covenants and agreements contained herein, the parties hereto agree to the following terms and conditions.

 

Purchase, License or Performance

Severance

1. Severance

In exchange for the release and covenant not to sue set forth below, the Company will pay Executive the Severance Benefit, subject to the terms and conditions of this Agreement.

 

Consideration; Mechanics of Exchange

Compensation

Severance

Termination Benefits

2. Severance Benefits

[Drafting Note: Select Severance or Termination Benefits]

Severance Benefit. In exchange for the release and covenant not to sue set forth below, the Company will pay Executive the equivalent of [ ] weeks’ salary, or $[ ], less all required withholdings. The severance will be paid in a lump sum within ten days following expiration of the seven-day period set forth below in the Revocation provision.

OR (same language as employment agreement)

2. Compensation Upon Termination

(a) Termination Without Cause; With Good Reason. If the Executive's employment is terminated by the Company Without Cause or by the Executive With Good Reason during the Employment Period, the Company shall provide to the Executive the Accrued Obligations, Severance Compensation, and Other Benefits.

(b) Termination Upon Death, Disability or Retirement. If Executive's employment is terminated by reason of Executive’s death, Disability or Retirement, the Company shall pay to the Executive (or the Executive’s estate or beneficiaries) the Accrued Obligations and Other Benefits.

(i) In the event of Termination due to Death, the Executive shall also be entitled to any pension survivor benefits that may become due pursuant to any Executive benefit plan or program of Company.
(ii) In the event of Termination due to Disability, the Executive shall also be entitled to payment of [a lump-sum] disability benefit pursuant to any Executive disability plan or program of Company.

(c) Termination for Cause; Without Good Reason. If the Executive's employment is terminated by the Company For Cause or by the Executive Without Good Reason during the Employment Period, the Company shall provide to the Executive the Accrued Obligations, and shall have no other severance obligations under this agreement.

(d) Accrued Obligations.

(i) Definition of Accrued Obligations. "Accrued Obligations" shall mean the sum of the following unpaid benefits as of the Date of Termination:

(A) payment of any earned but unpaid portion of Executive's annual base salary as in effect from time to time ("Base Salary") through the effective date of such termination;

(B) reimbursement for any reasonable, unreimbursed and documented business expense he has incurred in performing Executive's duties hereunder;

(C) the right to elect continuation coverage of insurance benefits to the extent required by law; and

(D) payment of any accrued but unpaid benefits (including without limitation, any bonus due by virtue of having met all applicable performance targets prior to the effective date of such termination), and any other rights, as required by the terms of any Executive benefit plan or program of Company.

[For the purpose of this definition, except as provided in the applicable plan, program or policy, amounts shall be deemed to accrue ratably over the period during which they are earned, but no discretionary compensation shall be deemed earned or accrued until it is specifically approved by the Board in accordance with the applicable plan, program or policy.]

(ii) Payment of Accrued Obligations. All Accrued Obligations shall be paid to the Executive in a lump sum in cash within [NUMBER OF DAYS] days of the [Effective Date of this Agreement][or Date of Termination].

(e) Severance Compensation.

(i) Definition of Severance Compensation. "Severance Compensation" shall mean an amount equal to [MULTIPLIER NUMBER] times the sum of:

(A) the Executive's then-current annual base salary, plus
(B) the [average of the sum of the][highest] bonus amounts earned by the Executive during the Employment Period.

OR
The Company shall pay Employee a total of [NUMBER] [DAYS; MONTHS; YEARS] severance (total amount equaling $[X]) ('Severance Compensation').

(ii) Payment of Severance Compensation. The Severance Payment [less applicable deductions and withholdings] shall be paid in a lump sum within[NUMBER OF DAYS] business days following the [Effective Date of this Agreement][or Date of Termination].

OR
[Provided Executive is in compliance with all Covenants,] The Severance Compensation [less applicable deductions and withholdings] shall be, payable in accordance with Company’s regular pay period.

(f) Other Benefits. "Other Benefits" shall mean, as of the Date of Termination:

(i) Equity Awards.

All equity awards held by the Executive shall become fully and unconditionally vested, fully exercisable and fully transferable (except for transfer restrictions imposed by law).

OR
Executive's rights to vesting of any outstanding stock options, restricted stock awards and other equity incentive awards ("Equity-Based Awards") and rights to exercise any outstanding Equity-Based Awards, shall continue throughout the Severance Period in the same manner as if the Executive continued to serve as an Executive of the Company during such Severance Period;

"Equity Awards” shall consist of (a) shares of the capital stock of the Company (“Stock”), (b) options and other rights to purchase shares of Stock, (c) stock units, performance units or phantom shares whose value is measured by the value of shares of Stock and (d) stock appreciation rights whose value is measured by increases in the value of shares of Stock.

(ii) Welfare Benefit Plans.

If the Executive elects to continue health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act (‚”COBRA”), the Company shall pay [the entire] [the employer portion of the] monthly premium under COBRA for the Executive and, if applicable, the Executive's dependents until the earliest of:

(A) the close of the Continuation Period,

(B) the expiration of the Employee’s continuation coverage under COBRA or

(C) the date when the Employee receives substantially equivalent health insurance coverage in connection with new employment or self-employment.

OR
The Company shall continue coverage for Executive (and, if applicable under the applicable welfare benefit plan(s), his spouse and family) under Executive benefit plans (such as medical, dental, disability and life) that covered him (or them) immediately before Executive's termination as if he had remained in employment until the end of the Severance Period. [If Executive's participation in any plan is barred, the Company shall either arrange to provide Executive (his spouse and family, if applicable) substantially similar benefits or pay Executive the equivalent tax affected value of the substantially similar benefits in cash, provided such cash payment(s) are made in the tax years such that the payments are compliant with the payment rules under Code section 409A.]

[DRAFTING NOTE: consider other benefits provided under any employment agreement, such as office, car, or club membership]

[(g) Nature of Payments. Any amounts due under this Section are in the nature of severance payments considered to be reasonable by the Company and are not in the nature of a penalty.]

[(h) Release. The Executive be not entitled to receive any amounts, rights or benefits under the Severance Compensation or Other Benefits unless the Executive executes a release of claims against the Company in form and substance as set forth in [the attached Release Form].]

[(i) Payments Terminated. If the Board of Company has determined in good faith that the Executive has failed to comply with the requirements of the Confidentiality, Non-Solicitation and Non-Competition provisions at any time following any termination, then Company shall have no further obligation to pay any amounts or provide any benefits under this Agreement.]

[(j) No Obligation to Mitigate. Executive shall not be required to mitigate the amount of any payment provided for in this Section 2 by seeking other employment or otherwise and no such payment or benefit shall be eliminated, offset or reduced by the amount of any compensation provided to the Executive in any subsequent employment.]

[(k) Withholding and Taxes. The Company may deduct or withhold from any amounts owing from the Company to Executive all federal, state and local income, employment or other taxes as may be required to be withheld by any applicable law or regulation.]

 

Representations

 Representations and Warranties

3. Representations and Warranties. The Company and the Contractor respectively represents and warrants to each other that each respectively is fully authorized and empowered to enter into the Agreement and that their entering into the Agreement and [to each parties' knowledge] the performance of their respective obligations under the Agreement will not violate any agreement between the Company or the Contractor respectively and any other person, firm or organization or any law or governmental regulation.

 

Covenants

Restrictions on Conduct of Contractor

4. Release, Waiver and Covenant Not to Sue

(a)  Release and Waiver. Executive hereby releases and waives all claims and causes of action of any kind that he has, known and unknown, against Company, including its owners, officers, directors, parents, subsidiaries, employees, affiliates, agents, attorneys, joint ventures, successors and/or assigns (Company together with these individuals and entities are referred to as the “Released Parties”). This release and waiver includes all claims and causes of action that he has under any federal, state or local law, including Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act and the state law equivalents of any of these statutes. It also includes any common law claims, including contract and tort claims.

[The Parties agree that to the extent, if any, Executive may have a right to file or participate in a claim or charge against the Company, which cannot be waived, the Agreement shall not be intended to waive such a right. However, even if Executive has a right to file or participate in a claim or charge against the Company, the Executive agrees that the Executive shall not obtain, and hereby waives any right to, relief (legal, equitable, or other) from such a claim or charge.]

(b) Covenant Not to Sue. Executive covenants not to initiate a lawsuit or administrative complaint or charge or commence any sort of action or proceeding whatsoever against the Released Parties at any time in the future based on any right or claim that arose on or before the Effective Date of this Agreement.

4. Release, Waiver and Covenant Not to Sue

(a) Release and Waiver. Executive hereby releases and waives all claims and causes of action of any kind that he has, known and unknown, against Company, including its owners, officers, directors, parents, subsidiaries, employees, affiliates, agents, attorneys, joint ventures, successors and/or assigns (Company together with these individuals and entities are referred to as the “Released Parties”). This release and waiver includes all claims and causes of action that he has under any federal, state or local law, including Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act and the state law equivalents of any of these statutes. It also includes any common law claims, including contract and tort claims.

[The Parties agree that to the extent, if any, Executive may have a right to file or participate in a claim or charge against the Company, which cannot be waived, the Agreement shall not be intended to waive such a right. However, even if Executive has a right to file or participate in a claim or charge against the Company, the Executive agrees that the Executive shall not obtain, and hereby waives any right to, relief (legal, equitable, or other) from such a claim or charge.]

(b) Covenant Not to Sue. Executive covenants not to initiate a lawsuit or administrative complaint or charge or commence any sort of action or proceeding whatsoever against the Released Parties at any time in the future based on any right or claim that arose on or before the Effective Date of this Agreement.

5. Confidentiality

(a) Obligation. The Executive agrees to maintain the strict confidentiality of all Confidential Information during the term of this Agreement and [for a period of CONFIDENTIALITY PERIOD] thereafter.

(b) Scope. For purposes of this Agreement, "Confidential Information" shall mean all information and materials of Company, and all information and materials received by Company from third parties (including but not limited to affiliates, subsidiaries, chapters, and members of Company), which are not generally publicly available and all other information and materials which are of a proprietary or confidential nature, even if they are not marked as such.

(c) Survival. This provision shall survive the termination of this Agreement indefinitely.

6. Intellectual Property

(a) Ownership. Executive agrees that all copyrights, trademarks, patents, and other intellectual property rights to works or marks arising in from or in connection with the Executive's employment by Company are "work made for hire" within the definition of Section 101 of the Copyright Act (17 U.S.C. 101) and shall remain the sole and exclusive property of Company.

(b) Assignment of Interest. To the extent any work product is not deemed to be a work made for hire within the definition of the Copyright Act, Executive with effect from creation of any and all work product, hereby assigns, and agrees to assign, to Company all right, title and interest in and to such work product, including but not limited to copyright, all rights subsumed thereunder, and all other intellectual property rights, including all extensions and renewals thereof.

(d) Moral Rights. Executive also agrees to waive any and all moral rights relating to the work product, including but not limited to, any and all rights of identification of authorship and any and all rights of approval, restriction or limitation on use, and subsequent modifications.

(e) Assistance. Executive further agrees to provide all assistance reasonably requested by Company, both during and subsequent to the Term of this Agreement, in the establishment, preservation and enforcement of Company's rights in the work product.

(f) Return of Property. Upon the termination of this Agreement, Executive agrees to deliver promptly to Company all printed, electronic, audio-visual, and other tangible manifestations of work product, including all originals and copies thereof.

7. Non-Competition

(a) Restrictions. During the term of this Agreement and for a period of [NON COMPETITION PERIOD] immediately following the termination of this Agreement, Executive shall not, directly or indirectly, without the prior written consent Company, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, or consultant of any Entity engaged in the Restricted Business.

(b) Exceptions. Executive shall not be deemed to be in contravention of the foregoing if Employee participates as a passive investor holding up to 1% of the equity securities of an Entity engaged in the Restricted Business, which securities are publicly traded.

8. Non-Solicitation.

During the term of this Agreement and for [NON-SOLITICATION PERIOD] after any termination of this Agreement, Contractor will not, without the prior written consent of the Company, either directly or indirectly[, on Contractor 's own behalf or in the service or on behalf of others], solicit or attempt to solicit, divert or hire away any person employed by the Company[ or any customer of the Company].

9. Non-Disparagement

(a) Executive Obligation. Executive will not at any time, during or after the Term, disparage, defame or denigrate the reputation, character, image, products or services of the Company, or of any of its Affiliates, or, any of its or its Affiliate s directors, officers, stockholders, members, employees or agents.

(b) Company Obligation. The Company will not, except as may be required by law, issue any official press release or statement which is intended to disparage Executive.

10. Acknowledgement. Executive [expressly] acknowledges that the covenants of this Agreement are supported by good and adequate consideration, and that such covenants are reasonable and necessary [in terms of duration, scope and geographic area] to protect the legitimate business interests of Company.

 

Conditions

 

 

 

Term and Termination

 

 

Indemnification

Indemnification

 

Remedies

 

General Provisions

Notices (92%)

Severability (86%)

Governing Law (84%)

Entire Agreement (78%)

Waiver (72%)

Assignment (66%)

Arbitration and Dispute Resolution (53%)

Counterparts (52%)

Headings (50%)

Taxes and Withholding (46%)

Mitigation (42%)

Survival (41%)

Amendment (35%)

Attorneys Fees (33%)

Successors (32%)

Injunctive Relief (32%)

Remedies (29%)

Binding Agreement (23%)

Section 409A of the Code (22%)

Conflicting Agreements (16%)

Construction (14%)

Enforcement (13%)

Venue (12%)

More clauses…

11. General Provisions

(a) Entire Agreement. This Agreement constitutes the entire agreement between the parties, and supersedes all prior agreements, representations and understandings of the parties, written or oral.

(b) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same agreement.

(c) Amendment. This Agreement may be amended only by written agreement of the parties.

(d) Notices. All notices permitted or required under this Agreement shall be in writing and shall be delivered in person or mailed by first class, registered or certified mail, postage prepaid, to the address of the party specified in this Agreement or such other address as either party may specify in writing. Such notice shall be deemed to have been given upon receipt.

(e) Assignment. This Agreement shall not be assigned by either party without the consent of the other party.

(f) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of [GOVERNING LAW STATE], without regard to its conflict of laws rules.

(g) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege.

(h) Severability. The invalidity or unenforceability of any 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.

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