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Executive Employment Agreement

This Executive Employment Agreement is made as of [AGREEMENT DATE] between [PARTY A NAME], with its principal place of business at [PARTY A  ADDRESS] (the "Company") and [PARTY B NAME], whose principal place of residence is at [PARTY B ADDRESS] (the "Executive").

Employment Position. For the Term, [PARTY B] shall serve as [TITLE OF EXECUTIVE POSITION] of [PARTY A][, and will report to [PARTY A]'s [Chief Executive Officer][, [OTHER SUPERVISOR OF EXECUTIVE],] and [PARTY A]'s Board of Directors (the "Board"). 

Terms of Employment

[PARTY B]'s Duties. [PARTY B] shall perform the duties commonly performed by an executive in that position, as well as any other duties that [PARTY B] may direct, including the following duties:

[INCLUDE ENUMERATED LIST OF EXECUTIVES DUTIES]

Dedication. [PARTY B] shall devote his or her reasonable efforts and substantially all his or her productive time and attention during normal working hours to the performance of his or her duties as [PARTY A]'s [TITLE OF EXECUTIVE POSITION].

Place of Performance. [PARTY B] shall work at [PARTY B]'s head office, located in [CITY, STATE], subject to reasonable travel requirements as may be necessary or desirable to fully perform his or her duties.

Compliance with [PARTY A] Policy. [PARTY B] shall use reasonable efforts to comply with all of [PARTY A]'s by-laws, policies, corporate documentation 

Outside Activities. [PARTY A] may

serve on industry, trade, civic, or charitable boards or committees,

engage in charitable activities and community affairs, and

manage personal investments and affairs,

if these activities do not materially interfere with the proper performance of his or her employment duties.

1.  Benefits

1.1. Vacation

{Stated Vacation Leave} Employee shall be entitled to [VACATION ALLOWANCE] of vacation with pay during each calendar year during the period of employment in accordance with the Employer's applicable personnel policy as in effect from time to time.

OR

{Combined Vacation, Illness and Disability Leave} Employee shall be entitled to [VACATION ALLOWANCE] days vacation annually and shall be entitled to the same personal time and sick leave, and disability leave as other employees of the Company.

OR

{Favorable Vacation Leave} Vacation

(i) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and the Affiliated Companies as in effect generally at any time after the Effective Date with respect to other senior executives of the Company; provided, that in no event shall the Executive be entitled to less than [number of] weeks' paid vacation per year.

(ii) Holidays. The Executive shall be entitled to all paid Company holidays.

(iii) Carry-Over. Any vacation not used during a calendar year may not be used during any subsequent period.

(iv) Prorated. Vacation time shall be prorated for any partial calendar year of employment.

(v) Scheduling. The times for such vacations shall be selected by the Executive, provided the dates selected do not interfere materially with the performance of Executive's duties and responsibilities under this agreement.

The vacation time shall be taken at such time or times as Executive and Employer may reasonably determine.

1.2. Insurance

{Medical Coverage} The Company shall provide Executive with life, medical, dental and disability coverage made available to its senior executives and key management employees, subject to and on a basis consistent with the terms, conditions and overall administration of such coverage.

OR

{Medical Expense Reimbursement} The Company shall reimburse the Executive for the full amount of any medical, dental and optical expenses not covered under any group medical plan from time to time in effect for the benefit of Company employees generally.

1.3. Automobile

{Provision of Automobile} The Company shall provide Executive with an automobile for business use in accordance with the automobile policies adopted by the Company from time to time. [The Company shall pay the expenses related to the use and upkeep of the automobile and insurance coverage.]

OR

{Automobile Allowance} The Company will provide Executive with [AUTOMOBILE ALLOWANCE] per year for the purchase or lease of a vehicle.

1.4. Amendment of Benefit Plans. The Company reserves the right to amend, terminate and/or suspend such benefits generally.

1.  Benefits. During the term of Employment, the Executive shall be entitled to participate in employee benefit plans generally made available to [senior] executives of the Company.

1.  Fee and Expenses

1.1. Reimbursement of Expenses. The [PARTY A] shall reimburse the [PARTY B] for all reasonable and necessary expenses the [PARTY B] incurs in connection with this agreement.

1.2. Pre-Approval Required. The [PARTY A] will only be required to reimburse the [PARTY B] for expenses the [PARTY A] pre-approved in writting. 

1.3. Receipts and Records. The [PARTY B] shall keep all receipts or other records of its expenses to submit to the [PARTY A] for reimbursement of its expenses.

1.4. Expense Invoices. The [PARTY B] will invoice the [PARTY A] each [PAY PERIOD] for reimbursement of the [PARTY B]'s expenses. The [PARTY B] must include with each invoice the receipts or other records to reasonably detail each expense in the invoice for which the [PARTY B] is requesting reimbursement. The [PARTY A] shall reimburse the [PARTY B] within 10 business days' of receipt of each invoice.

1.  Fee and Expenses

1.1. Reimbursement of Expenses. The [PARTY A] shall reimburse the [PARTY B] for all reasonable and necessary expenses the [PARTY B] incurs in connection with this agreement.

1.2. Receipts and Records. The [PARTY B] shall keep all receipts or other records of its expenses to submit to the [PARTY A] for reimbursement of its expenses.

1.3. Expense Invoices. The [PARTY B] will invoice the [PARTY A] each [PAY PERIOD] for reimbursement of the [PARTY B]'s expenses. The [PARTY B] must include with each invoice the receipts or other records to reasonably detail each expense in the invoice for which the [PARTY B] is requesting reimbursement. The [PARTY A] shall reimburse the [PARTY B] within 10 business days' of receipt of each invoice.

1.  Fee and Expenses

1.1. Advancement of Expenses. The [PARTY A] shall advance to the [PARTY B] $[ADVANCED EXPENSES], within 10 business days' of the effective date of this agreement, to cover the [PARTY B]'s reasonable and necessary expenses incurred in connection with this agreement ("Advanced Expenses").

1.2. Receipts and Records. The will keep all receipts or other records of its use of the Advanced Expenses.

1.3. Refund of Unspent Advancement. Within 30 business days' of the end of this agreement, the [PARTY B] will return to the [PARTY A] alll unspent Advanced Expenses. The [PARTY A] may require the [PARTY B] to also submit to the [PARTY A] all receipts or other records detailing the reasonableness and necessity of the [PARTY B]'s use of the Advanced Expenses.

1.  Fee and Expenses

1.1. Reimbursement of Expenses. The [PARTY A] shall reimburse the [PARTY B] for all reasonable and necessary expenses the [PARTY B] incurs in connection with this agreement.

1.2. Receipts and Records. The [PARTY B] shall keep all receipts or other records of its expenses to submit to the [PARTY A] for reimbursement of its expenses.

1.3. Expense Invoices. The [PARTY B] will invoice the [PARTY A] each [PAY PERIOD] for reimbursement of the [PARTY B]'s expenses. The [PARTY B] must include with each invoice the receipts or other records to reasonably detail each expense in the invoice for which the [PARTY B] is requesting reimbursement. The [PARTY A] shall reimburse the [PARTY B] within 10 business days' of receipt of each invoice. Any expenses the [PARTY A] fails to reimburse within this 10 day period will be deemed Late Reimbursement.

1.4. Interest on Late Reimbursement. The [PARTY A] will pay interest on any Late Reimbursement at a rate of 1% per month (12.68% annually) or the maximum allowed by law, whichever is less.

Withholding for Taxes

Right to Withhold Taxes from Consideration. Each of the parties may deduct and withhold amounts from the [AMOUNTS PAYABLE] otherwise payable to any person under this agreement as necessary to make any payments required under the Code or any applicable state, local, or non-U.S. Tax Law.

Treatment of the Amount Withheld. Any amounts timely deducted and withheld under this [WITHHOLDING FOR TAXES] subclause will be treated for all purposes of this agreement as having been paid to the person the amount would have been paid to had it not been deducted and withheld under this subclause.

Withholding[PARTY A] may withhold from any amounts payable to [PARTY B] under this agreement, including Federal, state and local Taxes as may be required to be withheld under any applicable Law.

Term. This agreement begins on [EFFECTIVE DATE], and will continue until terminated.

Term. This agreement begins on [EFFECTIVE DATE] and will continue until [TERMINATION CONDITION OR EVENT], unless terminated earlier.

Term

Initial Term. The "Initial Term" of this agreement begins on [EFFECTIVE DATE] and will continue for [TERM YEARS] years, unless terminated earlier.

Renewal Term. Following the Initial Term, the [PARTY B] may renew this agreement for successive "Renewal Terms" of [RENEWAL YEARS] length, unless terminated earlier, by giving the [PARTY A] notice of the intent to renew this agreement, at least [RENEWAL NOTICE DAYS] business days before the end of the Current Term.

Current Term. The "Current Term" of this agreement means either the Initial Term or the then-current Renewal Term.

Term

Initial Term. The "Initial Term" of this agreement will begin on [EFFECTIVE DATE] and continue for [TERM MONTHS] months, unless terminated earlier.

Renewal Terms

Following the Initial Term. At the expiration of the Initial Term, this agreement will automatically renew for a renewal term of [RENEWAL TERM] months length ("Renewal Term"), unless terminated earlier.

Following a Renewal Term. At the expiration of the then current Renewal Term, this agreement will automatically renew for a another Renewal Term, unless terminated earlier.

Election Not to Renew. Either party may elect not to renew this agreement, by providing notice to the other party at least [NON-RENEWAL NOTICE PERIOD] Business Days' before the end of the Current Term.

Current Term. "Current Term" means either the Initial Term or the then current Renewal Term.

 Term. The term of this agreement begins on [EFFECTIVE DATE], and will continue for [TERM YEARS] years, unless terminated earlier ("Term").

Non-Solicitation

No Solicitation. Subject to paragraph [VOLUNTARY CONTACTS], during the Non-Solicitation Period, [PARTY B] will not, directly or indirectly, on [PARTY B]'s own behalf or in the service or on behalf of others, in any capacity:

induce or attempt to induce any officer, director, or employee to leave [PARTY A][ or the Company];

solicit or accept the business of any customer or consultant of [PARTY A][ or the Company]; or

divert, entice, terminate or reduce its relationship with [PARTY A][ or the Company] or otherwise take away from [PARTY A][ or the Company] the business or patronage of any customer, or attempt to do so.

Voluntary Contacts. [PARTY B] may employ or accept the business of persons or customers of [PARTY A] who contact [PARTY B] on his or her own initiative without any direct or indirect solicitation by or encouragement (not including a general solicitation of employment not specifically directed towards employees of [PARTY A] [or the Company]) by [PARTY B].

Non-Solicitation Period"Non-Solicitation Period" means the period starting on the Effective Date of this agreement and ending [NON-SOLICITATION PERIOD TERM] after termination of this agreement.

Non-Solicitation

No Solicitation. Subject to paragraph [VOLUNTARY CONTACTS], during the Non-Solicitation Period, [PARTY B] will not directly or indirectly, on [PARTY B]'s own behalf or in the service or on behalf of others, in any capacity:

induce or attempt to induce any officer, director, or employee to leave [PARTY A] [or Company]; or

solicit or accept the business of any customer or consultant of [PARTY A] [or Company].

Voluntary Contacts. [PARTY B] may employ or accept the business of persons who contact [PARTY B] on his or her own initiative without any direct or indirect solicitation by or encouragement (not including a general solicitation of employment not specifically directed towards employees of [PARTY A] [or Company]) by [PARTY B].

Non-Solicitation Period"Non-Solicitation Period" means the period starting on the Effective Date of this agreement and ending [NON-SOLICITATION PERIOD TERM] after termination of this agreement.

Non-Solicitation

No Solicitation. Subject to paragraph [PERMITTED CONTACTS] directly below, during the Non-Solicitation Period, [PARTY B] will not directly or indirectly, on [PARTY B]'s own behalf or on behalf of others, in any capacity, induce or attempt to induce any officer, director, or employee to leave [PARTY A].

Permitted Contacts

Voluntary Contacts. [PARTY B] may employ any officer, director, or employee of [PARTY A] who contacts [PARTY B] on his or her own initiative without any direct or indirect solicitation by or encouragement (not including a general solicitation of employment not specifically directed towards employees of [PARTY A][or the Company]) by [PARTY B].

Terminated Employees. [PARTY B] may employ any former officer, director, or employee of [PARTY A] whose employment with [PARTY A] has terminated.

Non-Solicitation Period"Non-Solicitation Period" means the period starting on the Effective Date of this agreement and ending [NON-SOLICITATION PERIOD TERM] after termination of this agreement.

1. Acknowledgements

1.1. Extent of [PARTY]'s Obligations. Except for the terms of section 3.2 (Permitted investments), [PARTY] 's obligations under this agreement extend to any actions carried out on his or her own behalf or on behalf of or in connection with any other Person, directly or indirectly, in any capacity and in any part of the Restricted Territory.

1.2. Reasonableness of Restrictions. [PARTY] acknowledges that the restrictions contained in this agreement are (a) fair and reasonable in scope and duration, (b) necessary to protect the Company's legitimate business interests, and (c) a material inducement to the Company to enter into [this agreement/TRANSACTION AGREEMENT]. Accordingly, [PARTY] waives all defences to the Company's strict enforcement of his or her obligations under this agreement.

1.3. Enforcement of Restrictions. If any restriction imposed under this agreement is in any jurisdiction held to be excessively broad, that restriction will be interpreted, in that jurisdiction, by limiting the particular term so as to be enforceable to the extent compatible with the applicable Law in that jurisdiction.

1. Reasonableness of Restrictions. [PARTY] acknowledges that the restrictions contained in this agreement are (a) fair and reasonable in scope and duration, (b) necessary to protect the Company's legitimate business interests, and (c) a material inducement to the Company to enter into [this agreement/TRANSACTION AGREEMENT]. Accordingly, [PARTY] waives all defences to the Company's strict enforcement of his or her obligations under this agreement.

Indemnification

[PARTY A] Indemnification. The [PARTY A] shall indemnify The [PARTY B] against all Indemnifiable Losses arising out of any Indemnifiable Proceeding.

Notice. The [PARTY B] shall promptly notify the [PARTY A] of the Indemnifiable Proceeding and deliver to the [PARTY A] all legal pleadings and documents necessary to defend the Indemnifiable Proceeding, before bringing a claim for indemnification. If the [PARTY B] fails to notify the [PARTY A] of the Indemnifiable Proceeding the [PARTY A] will be relieved of its indemnification obligations to the extent the [PARTY A] was prejudiced by the [PARTY B]'s failure.

Defense. In addition to indemnifying the [PARTY B] against all Indemnifiable Losses, the [PARTY A] may defend the [PARTY B] against the Indemnifiable Proceeding. To assume the defense, the [PARTY A] must promptly notify the [PARTY B] that it is doing so. 

Authority to Contest, Pay, or Settle. The [PARTY A] may contest, pay, or settle the Indemnifiable Proceeding without obtaining the [PARTY B]'s consent, only if the [PARTY A]'s decision (1) does not require the [PARTY B] to make any admission that it acted unlawfully, (2) does not effect any other legal proceeding against the [PARTY B], (3) provides that the claimant's monetary damages are paid in full by the [PARTY A], and (4) requires claimant release the [PARTY B] from all liability under the Indemnifiable Proceeding. 

Exclusive Remedy. The [PARTY B]'s right to indemnification is the exclusive remedy available in connection with the Indemnifiable Proceedings.

Definitions

“Indemnifiable Proceeding” means any judicial, administrative, or arbitration action, suit, claim, investigation, or proceeding against the [PARTY B] arising out of this agreement and relating to: 

any third party claim or proceeding brought against one party, including those based on product liability, infringement, use of goods or services, or personal injury or death;

any claim or proceeding brought by any governmental agency;

any claim alleging grossly negligent act or omission or willful conduct of the other party;

any claim arising from [specified covered claim(s)].

“Indemnifiable Losses” means the aggregate of Losses and Litigation Expenses.

“Loss” means any amount awarded in, or paid in settlement of, any Indemnifiable Proceeding, including any interest accrued, but excluding any Litigation Expenses.

“Litigation Expense” means any reasonable out-of-pocket expense incurred in defending an Indemnifiable Proceeding or in any related investigation or negotiation, including court filing fees, court costs, arbitration fees, witness fees, and attorneys’ and other professionals’ fees and disbursements.

Limits and Exclusions

Minimum Indemnifiable Losses. The [PARTY A] need not indemnify the [PARTY B] against Indemnifiable Losses that are less than [MINIMUM INDEMNIFIABLE LOSS AMOUNT].

Maximum Indemnifiable Losses. The [PARTY A] need not indemnify the [PARTY B] against Indemnifiable Losses that are more than [MAXIMUM INDEMNIFIABLE LOSS AMOUNT].

Exclusions. The [PARTY A] need not indemnify the [PARTY B] against Indemnifiable Losses to the extent the [PARTY B] acted unlawfully, negligently, or intentionally to cause those Indemnifiable Losses.

Indemnification

[PARTY A] Indemnification. The [PARTY A] shall indemnify the [PARTY B] against all Indemnifiable Losses arising out of any Indemnifiable Proceeding.

Notice. The [PARTY B] shall promptly notify the [PARTY A] of the Indemnifiable Proceeding and deliver to the [PARTY A] all legal pleadings and documents necessary to defend the Indemnifiable Proceeding, before bringing a claim for indemnification. If the [PARTY B] fails to notify the [PARTY A] of the Indemnifiable Proceeding the [PARTY A] will be relieved of its indemnification obligations to the extent the [PARTY A] was prejudiced by the [PARTY B]'s failure.

Defense. In addition to indemnifying the [PARTY B] against all Indemnifiable Losses, the [PARTY A] may defend the [PARTY B] against the Indemnifiable Proceeding. To assume the defense, the [PARTY A] must promptly notify the [PARTY B] that it is doing so. 

Authority to Contest, Pay, or Settle. The [PARTY A] may contest, pay, or settle the Indemnifiable Proceeding without obtaining the [PARTY B]'s consent, only if the [PARTY A]'s decision (1) does not require the [PARTY B] to make any admission that it acted unlawfully, (2) does not effect any other legal proceeding against the [PARTY B], (3) provides that the claimant's monetary damages are paid in full by the [PARTY A], and (4) requires claimant release the [PARTY B] from all liability under the Indemnifiable Proceeding. 

Exclusive Remedy. The [PARTY B]'s right to indemnification is the exclusive remedy available in connection with the Indemnifiable Proceedings.

Definitions

“Indemnifiable Proceeding” means any judicial, administrative, or arbitration action, suit, claim, investigation, or proceeding against the [PARTY B] arising out of this agreement and relating to:

any third party claim or proceeding brought against one party, including those based on product liability, infringement, use of goods or services, or personal injury or death;

any claim or proceeding brought by any governmental agency;

any claim alleging grossly negligent act or omission or willful conduct of the other party;

any claim arising from [specified covered claim(s)].

“Indemnifiable Losses” means the aggregate of Losses and Litigation Expenses.

“Loss” means any amount awarded in, or paid in settlement of, any Indemnifiable Proceeding, including any interest accrued, but excluding any Litigation Expenses.

“Litigation Expense” means any reasonable out-of-pocket expense incurred in defending an Indemnifiable Proceeding or in any related investigation or negotiation, including court filing fees, court costs, arbitration fees, witness fees, and attorneys’ and other professionals’ fees and disbursements.

 Mutual Indemnification. Each party (as "Indemnitor") shall indemnify the other party (as "Indemnitee") against all losses arising out of any third-party proceeding and relating to this agreement.

Indemnification

Direct Claim Indemnification. Each party (as "Indemnitor") shall indemnify the other party (as "Indemnitee") against all Indemnifiable Losses arising out of any Indemnifiable Proceeding.

Notice. The Indemnitee shall promptly notify the Indemnitor of the Indemnifiable Proceeding, and deliver to the Indemnitor all legal pleadings and documents necessary to defend the Indemnifiable Proceeding, before bringing a claim for indemnification. If the Indemnitee fails to notify the Indemnitor of the Indemnifiable Proceeding, the Indemnitor will be relieved of its indemnification obligations to the extent the Indemnitor was prejudiced by the Indemnitee's failure.

Exclusive Remedy. The Indemnitee's right to indemnification is the exclusive remedies available in connection to Indemnifiable Proceedings.

Definitions

“Indemnifiable Proceeding” means any judicial, administrative, or arbitration action, suit, claim, investigation, or proceeding against the Indemnitee arising out of this agreement and relating to:

any breach of any representation or warranty contained in this agreement;

any breach or violation of any covenant or other obligation under this agreement or applicable law;

any claim alleging grossly negligent act or omission or willful conduct of the other party.

(b) “Indemnifiable Losses” means the aggregate of Losses and Litigation Expenses.

“Loss” means any amount awarded in, or paid in settlement of, any Indemnifiable Proceeding, including any interest accrued, but excluding any Litigation Expenses.

“Litigation Expense” means any reasonable out-of-pocket expense incurred in defending an Indemnifiable Proceeding or in any related investigation or negotiation, including court filing fees, court costs, arbitration fees, witness fees, and attorneys’ and other professionals’ fees and disbursements.

Limits and Exclusions

Minimum Indemnifiable Losses. The Indemnitor need not indemnify the Indemnitee against Indemnifiable Losses that are less than [MINIMUM INDEMNIFIABLE LOSS AMOUNT].

Maximum Indemnifiable Losses. The Indemnitor need not indemnify the Indemnitee against Indemnifiable Losses that are more than [MAXIMUM INDEMNIFIABLE LOSS AMOUNT].

Exclusions. The Indemnitor need not indemnify the Indemnitee against Indemnifiable Losses to the extent the Indemnitee acted unlawfully, negligently, or intentionally to cause those Indemnifiable Losses.

Indemnification

Indemnification by [PARTY B]. The [PARTY B] shall indemnify the [PARTY A] against all losses and expenses arising out of any proceeding:

brought by either a third party or the [PARTY A]; and

that arises out of any breach by the [PARTY B] of its obligations, representations, warranties, or covenants under this agreement.

Mutual Indemnification. Each party (as an "Indemnifying Party") shall indemnify the other (as an "Indemnified Party") against all losses arising out of any proceeding:

brought by either a third party or an Indemnified Party; and

that arises out of the Indemnifying Party's willful misconduct or gross negligence.

Indemnification

[PARTY A] Indemnification. The [PARTY A] shall indemnify the [PARTY B] against all Indemnifiable Losses arising out of any Indemnifiable Proceeding.

Defense. In addition to indemnifying the [PARTY B] against all Indemnifiable Losses the [PARTY A] shall defend the [PARTY B] against any Indemnifiable Proceeding. The [PARTY A] shall reimburse the [PARTY B] for any resaonable Litigation Expenses incurred by the [PARTY B] in connection with the Indemnifiable Proceedings before the [PARTY A] assumes the defense of the Indemnifiable Proceeding, except for any expenses incurred by the [PARTY B]'s failure to promptly notify the [PARTY A] of the Indemnifiable Proceeding.

Authority to Contest, Pay, or Settle. The [PARTY A] shall obtain the [PARTY B]'s consent before making any decision to contest, pay, or settle an Indemnifiable Proceeding.

Non-Exclusive Remedy. The [PARTY B]'s right to indemnification is not exclusive, but in addition to any other remedies available to the [PARTY B].

Definitions

“Indemnifiable Proceeding” means any judicial, administrative, or arbitration action, suit, claim, investigation, or proceeding against the [PARTY B] arising out of this agreement and relating to:

any third party claim or proceeding brought against one party, including those based on product liability, infringement, use of goods or services, or personal injury or death;

any claim or proceeding brought by any governmental agency;

any claim alleging grossly negligent act or omission or willful conduct of the other party;

any claim arising from [specified covered claim(s)].

“Indemnifiable Losses” means the aggregate of Losses and Litigation Expenses.

“Loss” means any amount awarded in, or paid in settlement of, any Indemnifiable Proceeding, including any interest accrued, but excluding any Litigation Expenses.

“Litigation Expense” means any reasonable out-of-pocket expense incurred in defending an Indemnifiable Proceeding or in any related investigation or negotiation, including court filing fees, court costs, arbitration fees, witness fees, and attorneys’ and other professionals’ fees and disbursements.

General Provisions

Overview

What Is An Executive Employment Agreement?

The parties to an executive employment agreement are the company and the executive that the company is hiring.

Executives fill the highest managerial positions in a company—CEO, COO, CFO, etc.—and are ultimately responsible for overseeing the day-to-day operations. In order to fulfill their responsibilities, executives have a high degree of discretion, but with that comes a corresponding degree of responsibility, and potential liability.

Because of the importance of good executives, there is a competitive market for the top executives. As a result, executives tend to have more bargaining power than a typical employee in negotiating their employment agreement. Thus, executive employment agreements tend to be more complex and varied than typical employment agreements. That said, there are some common factors and clauses every executive employment agreement should cover.

Five Key Considerations:

1. Termination: With Cause, Without Cause, and Defining Cause

An executive employment agreement can be terminated prematurely either with cause or without cause.

Termination with cause can happen after an event or action occurs that the parties agree would be grounds for terminating the agreement. For example, the executive breaching his duties to the company or neglecting his duties are common grounds for termination with cause. After termination with cause, the agreement ends immediately.

Termination without cause, is also commonly called termination with notice, and happens when either party delivers notice to the other party that it is ending the employment relationship. Generally, the terminating party has to notify the other in a particular manner, by letter for example, and once notice is given, the agreement continues for a predetermined period before ending.

Whether termination is with or without cause affects certain obligations the parties have in ending the agreement. For example, the company usually owes a severance package to the executive after termination without cause, and it may be harder to enforce a non-compete clause after termination without cause.

Therefore, defining “cause” is one of the most important parts of the executive employment agreement.

2. Limiting Liability: Indemnification and Exculpation

There are two important contractual ways of limiting an executive’s potential exposure to liability: indemnification, and exculpation.

Indemnification is a risk-shifting clause; a guarantee that the indemnifying party—here, the company—will pay for certain losses incurred by the indemnified party—here, the executive.

Exculpation excuses an executive from liability from the breach of the fiduciary duty of care—the duty to exercise good business judgement and use ordinary care and be reasonably prudent in making business decisions.

Indemnification can cover all sorts of claims against an executive. Exculpation is more limited, and can protect the executive against liability for breaching his duty of care, but not the duty of loyalty.

For more on Indemnification and exculpation, see Stafford Matthews, Indemnification Clauses (accessed July 1, 2016), and  Richard B. Kapnick & Courtney A. Rosen, The Exculpatory Clause Defense to Shareholder Derivative Claims (accessed July 1, 2016).

3. Non-Compete and Non-Disclosure

Executives will be hands-on with virtually all of the most important business decisions and day-to-day operations of the company. Executives will also have access to the most valuable company information, strategy, and trade secrets.

The important roles and access to information executives enjoy means the company should supplement the executive employment agreement with non-compete and non-disclosure agreements.

Non-compete agreements in particular are very controversial—courts don’t like limiting individual's ability to find work—and some states are very reluctant to enforce them.

That said, even in states that are skeptical of non-compete agreements, because of the company’s legitimate interest in preventing a current or ex-executive from using the company’s own proprietary information against the company, courts tend to be more likely to enforce non-compete and non-disclosure agreements against executives than more typical employees.

4. Choice of Law

Like the rest of employment law, executive employment agreements are governed by state law. Because of differences between various states’ law on some important topics, non-compete clauses for example, it is important to include a choice of law clause in an executive employment agreement to make sure the party’s can control which state’s laws will govern the agreement.

Courts tend to respect choice of law clauses, so long as (A) there is a substantial relationship (often called a nexus) between the chosen law and the agreement, and (B) there are not strong public policy reasons for applying the law of another state.

5. Duties

The duties clause tends to be highly negotiated. Rather than a simple enumerated lists of duties, a robust executive employment agreements should outline the executive’s responsibilities with something like the following:

  1. The executive must perform all duties and responsibilities of [insert executive’s title].
  2. The executive must perform any other duties assigned by the [insert title(s) of company employee(s) who can supervise and control the executive, the President, for example].
  3. The executive must abide by all company bylaws, policies, procedures, and rules.
  4. The executive can be transferred to another management position, by the [insert title(s) of company employee(s) who can supervise the executive.]

Resources

For more on executive employment agreements, the following is a good library of resources:

Mark J. Oberti, 5 Things All Execs Should Have In Their Employment Agreements (accessed June 24, 2016.

Mike Drobka & Jeff Belfiglio, Understanding Executive Employment Agreements (accessed June 26, 2016).

Leitman Siegal & Payne PC, Drafting Executive Employment Agreements That Work for Employers (accessed June 26, 2016).

Peter M Panken & Jeffery D. Williams, Drafting Executive Employment Agreements That Work for Employers: An Annotated Model Agreement (accessed June 27, 2016).