Prompt Pack Executive Employment Agreement

Executive Employment Agreement

When to use this

Use this skill when drafting the formal employment agreement for a C-suite executive or senior leader. Executive agreements are more complex than standard employment contracts because they involve: equity compensation, performance-based remuneration, carefully defined termination scenarios with significant financial consequences, post-employment restrictions, and often a change-of-control component.

Typical triggers:

• Hiring a new CEO, CFO, COO, or General Counsel
• Renewing or renegotiating an existing executive agreement
• PE or VC-backed company formalizing founder employment terms at Series A or above
• Pre-IPO executive team alignment and contractual documentation
• Board compensation committee instructing legal counsel to document approved executive terms

Required inputs

Optional inputs

• Relocation provisions (common for international executive hires in MENA)
• Change-of-control provisions (golden parachute trigger and amount)
• Garden leave provisions
• Post-termination non-compete / non-solicitation
• D&O insurance coverage
• Housing and schooling allowances (standard in UAE/KSA expat executive packages)
• Discretionary authority limits (signing authority, hiring authority, capex thresholds)

Document structure

1. Parties and recitals

• Company name, jurisdiction, registered address
• Executive name, role title
• Effective date of agreement

2. Role and responsibilities

• Title and department
• Reporting structure (board, CEO, or other)
• Duties: general description and scope of authority
• Exclusivity: executive's full time and attention; no outside board positions or consulting without prior consent
• Fiduciary duties: reference to directors' duties under applicable company law if the executive is also a board member

3. Term

Indefinite-term approach (preferred in most common-law jurisdictions and DIFC):

• Employment continues until terminated by either party on notice
• "At-will" employment: NOT applicable in MENA or DIFC; there must be notice or payment in lieu

Fixed-term approach (common in MENA mainland, KSA):

• Agreement runs for an initial term of [2–3] years
• Automatically extends for 1-year periods unless terminated on [90 days'] notice before the end of the then-current term
• In UAE: fixed-term contracts under Federal Decree-Law No. 33 of 2021 cannot exceed 3 years in the initial term; renewal is permitted

4. Compensation

Base salary:

• Annual base salary in [currency]; paid [monthly / bi-weekly]
• Review: salary reviewed annually by the compensation committee; no entitlement to increase

Annual bonus:

• Target bonus: [X%] of base salary
• Performance conditions: [financial metrics / individual KPIs / board discretion]
• Payment timing: following board approval of annual results; typically within [90] days of financial year end
• Pro-rating on termination: specify whether the executive receives a pro-rated bonus for partial year of service
• Clearly state: "Bonus is discretionary unless performance conditions are met as determined by the board" — or, if contractual: state the specific trigger conditions

Equity compensation:

• Grant: [X] options / RSUs / phantom units at a price of [X] on [grant date]
• Vesting: [4-year] vesting; [1-year] cliff; monthly vesting thereafter
• Full reference to the company's equity incentive plan; this agreement provides the executive's individual grant terms
• Change of control: accelerated vesting on [single trigger / double trigger] (see Section on Change of Control)

Benefits:

• Health insurance: [gold-tier family coverage / BUPA / equivalent]
• Housing allowance: AED/SAR [X] per month (or company-provided housing)
• Transportation: car or allowance; driver (if applicable)
• Schooling allowance: up to [X] per child per year for [X] children
• Air tickets: [2] economy class / [1] business class round trips per year
• D&O insurance: company will maintain D&O coverage for the executive during employment and for [3–6] years post-departure (tail coverage)

5. Leave entitlements

• Annual leave: [30] calendar days (UAE statutory minimum; increase for senior executives common)
• Public holidays: per UAE/KSA statutory calendar
• Sick leave: per applicable UAE/KSA Labour Law provisions
• Emergency and bereavement leave: company policy
• Unpaid leave: by written agreement only

6. Confidentiality

• Broad obligation covering all confidential information (business plans, financial data, customer data, trade secrets, IP)
• Post-termination duration: indefinite for trade secrets; [3 years] for business confidential information
• Exceptions: public domain information, legally required disclosure, prior written authorization
• Obligation to return all company property (physical and digital) on departure

7. Intellectual property

• All IP created by the executive in connection with employment belongs to the company
• Executive assigns all rights (including moral rights waiver where applicable)
• Pre-existing IP carve-out: schedule pre-existing IP if executive has relevant pre-existing inventions

8. Termination scenarios

This section has the most financial consequence and must be precisely drafted:

Termination for cause:

• Definition of "cause": material breach of the agreement; gross misconduct; dishonesty; conviction of a criminal offense; serious negligence; willful neglect of duties
• On termination for cause: [30 days'] notice (or statutory minimum); no severance; accrued and vested equity retained (some plans allow forfeiture on "cause")
• In UAE/KSA: termination for cause must fall within the statutory grounds in the Labour Law; overly broad "cause" definitions are not effective against those statutory limits

Termination without cause:

• On termination without cause by the company:
  • [3–6] months' base salary in lieu of notice
  • Pro-rated bonus for current year
  • months' additional severance equal to [X months' base salary]
  • Continued vesting of equity for the severance period OR accelerated vesting of [X%] of unvested equity
  • Continuation of benefits for the severance period

Resignation for good reason:

• Define "good reason": material reduction in title, responsibilities, or compensation; relocation to a different city without consent; change of control
• On resignation for good reason: executive receives the same as termination without cause above

Resignation without good reason:

• Executive gives [90 days'] notice
• No severance; vested equity retained; unvested forfeited
• Garden leave: company may place executive on garden leave during notice period

Expiration of fixed term (for MENA fixed-term agreements):

• If company elects not to renew: treated as termination without cause
• If executive elects not to renew: treated as resignation; no severance
• Statutory end-of-service gratuity: payable in all cases on expiry

9. Change of control

• Definition: change of control means sale of [50%+] of company shares; merger; IPO (sometimes); sale of substantially all assets
• Accelerated vesting: on a change of control, [50–100%] of unvested equity accelerates (single trigger) — or: vesting accelerates only if executive is also terminated without cause or resigns for good reason within [12] months post-change of control (double trigger)
• Enhanced severance: if executive is terminated or leaves for good reason within [12] months following a change of control, severance equals [2x] annual base salary + target bonus

10. Post-employment restrictions

Non-compete:

• Duration: [12–24] months post-termination
• Geographic scope: limited to [specific markets where company operates]
• Activity scope: limited to the executive's actual area of responsibility
• Consideration: the terms of this agreement constitute adequate consideration
• Enforceability: see jurisdictional notes

Non-solicitation of employees:

• Duration: [12–24] months
• Scope: limited to direct reports and employees with whom the executive had material contact

Non-solicitation of customers:

• Duration: [12–24] months
• Scope: limited to customers with whom the executive had direct and material dealings

11. Governing law and dispute resolution

• Governing law: the law of the jurisdiction of employment (UAE Federal Law; DIFC Law; KSA Law, etc.)
• Dispute resolution: for UAE/KSA employment disputes, the labour courts are the primary forum for statutory claims; contractual disputes may go to arbitration if agreed
• In DIFC: DIFC Courts have jurisdiction over DIFC employment disputes; arbitration is also available

Jurisdictional notes

Non-compete enforceability in MENA

End-of-service gratuity for executives

The end-of-service gratuity applies to executives in UAE and KSA just as to regular employees:

• UAE: calculated on basic salary; 21 days per year for first 5 years; 30 days per year thereafter; max 2 years' total salary
• For executives whose base salary is, say, AED 500,000/year, the gratuity entitlement is material and must be budgeted for
• The agreement cannot waive or reduce the statutory gratuity entitlement

Common mistakes

• "For cause" definition too narrow: If "cause" is defined narrowly and does not cover gross misconduct or serious breach, the executive can engage in harmful behavior that still requires paying full severance.
• "Good reason" definition too broad: Overly broad "good reason" definitions allow executives to trigger severance after any organizational change; tie good reason to objective material changes.
• Single-trigger change-of-control acceleration: Single-trigger vesting acceleration (acceleration merely on change of control, regardless of what happens to the executive) can create perverse incentives for executives to support a sale rather than maximize value; double-trigger is more governance-friendly.
• No PILON clause: Without a payment-in-lieu-of-notice provision, the company must allow the executive to work out the full notice period, retaining access to systems and client relationships.
• Ignoring statutory floor: In UAE and KSA, the statutory minimum terms (notice, gratuity) apply regardless of what the agreement says; an agreement below the statutory floor is unenforceable to that extent.

Related skills

• [[prompt-pack-employment-offer-letter]]
• [[prompt-pack-employment-contract-compliance-review]]
• [[prompt-pack-equity-incentive-plan-summary]]
• [[prompt-pack-employee-handbook]]