Negotiating an Executive Employment Agreement: Equity, Severance, and Change of Control

Definitions that carry the money

• Cause: narrow it to defined, material, and curable conduct with notice and a cure period, ideally requiring a board determination.
• Good reason: a meaningful reduction in duties, title, reporting line, or compensation, or a relocation beyond a set radius — this is the clause that protects value after a reorganization.
• Change of control: confirm the definition captures asset sales and mergers, not only stock sales.
• Termination without cause: severance multiple, bonus treatment, COBRA coverage, and whether payment is conditioned on a release.

Equity is where the value concentrates

Ask for the plan documents and the grant agreement, not just the offer letter figure. The variables that matter are the vesting schedule and cliff, whether acceleration is single or double trigger, the post-termination exercise window, repurchase rights on unvested and vested shares, and how the strike price was set.

A double-trigger acceleration provision — acceleration on a change of control combined with a qualifying termination — is the market standard for senior hires and is frequently absent from a first draft. For option holders, an extended post-termination exercise window can be worth more than additional shares.

Terms that quietly transfer risk

• Clawback provisions, now common under listed-company rules, and how broadly they are drafted for private companies.
• Indemnification and an advancement-of-expenses obligation, plus confirmation you are covered by the D&O policy — including tail coverage after departure.
• Restrictive covenants: non-competes are void in California, and confidentiality and non-solicit language should be checked against that rule rather than assumed enforceable.
• Arbitration and fee-shifting terms, which shape how any dispute is resolved.
• Section 280G parachute exposure in a sale, and Section 409A compliance in the timing of deferred payments.

For the company side

Employers get better outcomes from a clear, consistent executive template: defined cause, disciplined good reason, sensible acceleration policy, and severance keyed to level. Ad hoc negotiation across a leadership team creates internal inconsistency that becomes an exhibit in the first executive dispute.

Rainey Law P.C. negotiates executive agreements for both incoming executives and the companies hiring them, and handles the separations when those relationships end.