Thursday, September 23, 2010

Founder CEOs and Severance Agreements: Drafting tips from Mark Hurd

The value of a severance agreements for departing CEOs lies not only in how much they promise to pay, but in what protection it preserves. Mark Hurd's agreement with HP sets out some of the subtleties that you should ensure your own arrangement addresses:

1. Continuation of Indemnity. Most severance agreements will stipulate that, once a has made a lump sum payment to the departing employee, the company's obligations to make any further payments cease. Make sure that any indemnity the Company provided youa s an officer/director survive your departure, so that you are adequately protected in any future litigation brought against you or the company.

2. Non disparagement/cooperation: Companies often require that departing employees agree not to disparage the business in any manner after they leave. Of course, this becomes awkward if you are approached by future investors or, say, asked to speak to a Congressional hearing. It's important to specify whether cooperation with respect to due diligence or other matters is agreed to.

You can view the full agreement at various sites on line.

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