The Employee Incentive Agreement serves as a crucial tool for businesses operating in the United States to attract, retain, and motivate key employees through structured reward systems. This document is essential when implementing performance-based compensation programs, equity participation plans, or bonus schemes. It ensures compliance with federal regulations including IRC Section 409A, securities laws, and state-specific employment requirements. The agreement typically outlines clear performance metrics, payment structures, and conditions for receiving incentives, while protecting both employer and employee interests through well-defined terms and conditions.
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1. Parties: Identifies the employer and employee entering into the agreement
2. Background: States the purpose of the agreement and context of the incentive program
3. Definitions: Defines key terms used throughout the agreement
4. Incentive Structure: Details the specific incentives being offered and performance metrics
5. Eligibility Criteria: Specifies conditions that must be met to qualify for incentives
6. Payment Terms: Outlines when and how incentive payments will be made
7. Term and Termination: Duration of the agreement and circumstances for termination
8. Governing Law: Specifies jurisdiction and applicable laws
1. Clawback Provisions: Terms for recovering incentive payments under specific circumstances when dealing with executive agreements or high-value incentives
2. Non-Competition: Restrictions on working for competitors, typically included for senior employees or when protecting trade secrets
3. Change of Control: Impact of company ownership changes on incentives, relevant for public companies or those planning exit events
4. Tax Gross-Up: Provisions for tax implications of incentives, particularly relevant for international employees or complex tax situations
1. Schedule A - Performance Metrics: Detailed breakdown of performance targets and calculation methods
2. Schedule B - Payment Schedule: Timeline and structure of incentive payments
3. Schedule C - Eligible Positions: List of positions or roles eligible for the incentive program
4. Appendix 1 - Award Calculation Examples: Sample calculations showing how incentives are determined
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