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Structuring Executive Employment Agreements Special Considerations for the Federal Contractor Thomas M. Daniel Danielle M. Ryman INITIAL CONSIDERATIONS What are your goals? What are the "must-haves"? What is the company's salary structure? Review personnel policies and benefit plans. Look at employment agreements for similarly-situated employees. ESSENTIAL PROVISIONS Position and duties Term Compensation Indemnification Termination Proprietary Information Non-competition/non-solicitation/non- disclosure ESSENTIAL PROVISIONS Injunctive Relief Arbitration Misc. Provisions (governing law, attorneys fees, advice of counsel) ESSENTIAL PROVISIONS – Duties Outline Duties Resignation from Board of Directors Location of Position Limitation on Outside Activities ESSENTIAL PROVISIONS – Term Fixed Term Year-to-Year ESSENTIAL PROVISIONS – Compensation Salary Reimbursement of Expenses Benefits Stock Issues Deferred Compensation & Section 409 Severance Payment ESSENTIAL PROVISIONS – Indemnification The company can agree, to the extent permitted by law, to indemnify the employee against liability incurred in his or her role as an officer or director of the company. ESSENTIAL PROVISIONS – Termination Death Disability Notice of Termination Change in Control ESSENTIAL PROVISIONS – Termination Termination for Cause Willful and repeated failure or refusal to carry out reasonable instructions; Material acts of dishonesty or disloyalty; Refusal or failure to furnish material information; Conviction of a crime constituting fraud, moral turpitude or other conduct that compromises the reputation of the employee or company; ESSENTIAL PROVISIONS – Termination Termination for Cause Engaging in a violation of the Code of Business Ethics and Conduct or any written policy or procedure which adversely affects the Company in any material respect; Commission of any act of fraud, misappropriation , embezzlement or theft, breach of fiduciary duty involving personal profit; Alcoholism or drug addiction; ESSENTIAL PROVISIONS – Termination Termination for Cause Conviction of, or guilty plea or plea of nolo contendere to any crime punishable as a felony; Credible evidence of the commission of acts which the Company reasonably believes could result in the Company being suspended or debarred from performing Government Contracts, or ESSENTIAL PROVISIONS – Termination Any other act, course of conduct, or omission that has or is reasonably likely to have a material adverse effect on the Company, its business or financial position, or its goodwill or reputation. ESSENTIAL PROVISIONS – Proprietary Information & Inventions Under the "work-for-hire" doctrine, a company retains a copyright in any works prepared by an employee in the regular course of business. Agreement should contain a provision providing that all invention and patent rights become the property of the Company. ESSENTIAL PROVISIONS – Non-Competition Enforceable so long as agreement is reasonable in scope, geographical limitation and time. ESSENTIAL PROVISIONS – Non-Solicitation& Non-Disclosure Non-solicitation agreements are enforceable. Provision forbidding disclosure of confidential or proprietary information ESSENTIAL PROVISIONS – Non-Disclosure Confidential Information Defined: Trade secrets, proprietary information, inventions or technology, policies, research, reports, software, customer lists, marketing or business development plans, or any other information about the company's business or operations maintained confidentially by the company. ESSENTIAL PROVISIONS – Injunctive Relief Acknowledgement that the non-competition, non-solicitation, and nondisclosure provisions of the agreement are essential to the Company's welfare, and that breach of the provisions will create a severe unfair business disadvantage that cannot be adequately remedied by traditional money damages. ESSENTIAL PROVISIONS – The Federal Contractor Present Responsibility Executive confirms: (1) He/She has not committed any criminal conduct; and (2) He/She has not been subject to debarment or suspension; Agreement Provisions: ESSENTIAL PROVISIONS – Arbitration Arbitration Theoretically quicker and less expensive than trial. Appeal is not an option except in rare circumstances Franken Amendment may prevent arbitration for DoD contractors. ESSENTIAL PROVISIONS – Miscellaneous Governing Law Entire Agreement Attorneys Fees Advice of Counsel Questions?
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