Executive Compensation Agreement Template for United States

An Executive Compensation Agreement is a legally binding contract under U.S. law that outlines the complete compensation package for senior-level executives. This document details base salary, bonuses, equity compensation, benefits, and termination provisions. It complies with federal regulations including IRC Section 409A and various securities laws, while also incorporating state-specific employment requirements. The agreement typically includes both short-term and long-term incentive structures, performance metrics, and protective provisions for both the company and executive.

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What is a Executive Compensation Agreement?

Executive Compensation Agreements are essential documents used when hiring or promoting individuals into senior leadership positions. These agreements, governed by U.S. federal and state laws, establish clear terms for executive compensation, including base salary, bonuses, equity compensation, benefits, and severance arrangements. The document serves to protect both the company's interests and the executive's rights while ensuring compliance with various regulations such as IRC Section 409A and securities laws. An Executive Compensation Agreement is particularly crucial for public companies and organizations with complex compensation structures.

What sections should be included in a Executive Compensation Agreement?

1. Parties: Identifies the company and executive, including full legal names and addresses

2. Background: States the context and purpose of the agreement

3. Definitions: Defines key terms used throughout the agreement

4. Position and Duties: Outlines the executive's role, responsibilities, and reporting structure

5. Term: Specifies duration of employment and renewal provisions

6. Base Salary: States the executive's base compensation and review procedures

7. Annual Bonus: Details performance-based compensation structure

8. Benefits: Outlines standard benefits package and special executive benefits

9. Termination Provisions: Specifies conditions and consequences of employment termination

What sections are optional to include in a Executive Compensation Agreement?

1. Equity Compensation: Details stock options or other equity-based compensation when offering stock-based compensation

2. Change in Control: Provisions related to company ownership changes, typically used for public companies or companies anticipating acquisition

3. Non-Compete: Restrictions on post-employment competition, used when protecting company interests is crucial

4. Clawback Provisions: Terms for recovering compensation in case of executive misconduct or financial restatements

What schedules should be included in a Executive Compensation Agreement?

1. Schedule A - Performance Metrics: Detailed bonus calculation methodology and performance targets

2. Schedule B - Equity Plan Terms: Details of stock option or restricted stock grants

3. Schedule C - Benefits Package: Comprehensive list of executive benefits and perquisites

4. Appendix A - Definitions: Extended definitions of complex terms and calculations

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

United States

Publisher

Genie AI

Cost

Free to use

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