Scenario 01

---
name: review-employment-diligence-scenario-01
task_id: corporate-ma/review-employment-diligence/scenario-01
description: Guides preparation of a buy-side employment diligence memorandum for an acquisition where executive employment agreements, severance arrangements, equity plans, and standard form agreements must all be systematically assessed.
activates_for: [planner, solver, checker]
---

# Skill: Employment Agreement Due Diligence Review

## 1. Subject-matter triage (only if applicable)

- Identify the governing document set before analysis: executive employment agreements, any company-wide severance arrangement, equity plan and representative award forms, standard-form employment agreement, and any priority diligence email.
- Identify the population in scope and separate individual executives from company-wide arrangements; if only one executive or one plan applies, say so expressly and explain why.
- Use the priority email as a triage tool to focus on the issues the deal team flagged, but do not let it displace review of the full document set.
- If a document is missing, inconsistent, or superseded, flag the gap first and state whether the missing item blocks a complete diligence view.

## 2. Failure modes the skill is correcting

- Executive agreements are reviewed piecemeal without synthesizing the aggregate change-of-control exposure as a deal cost.
- The standard-form agreement is not used as a comparison baseline, so departures that create hidden obligations are missed.
- The equity plan is reviewed in isolation without checking whether award-level provisions override, supplement, or conflict with plan defaults.
- Company-wide severance terms are overlooked because the reviewer focuses only on named executive contracts.
- Restrictive covenants are described abstractly without tying them to the governing law for each agreement and the practical enforceability risk at closing and after closing.
- The diligence memo states conclusions without showing how each issue interacts with other documents or what it means for the transaction.

## 3. Legal frameworks / domain conventions that apply

- Treat the review as buy-side diligence: the goal is to identify cash, equity, retention, and restrictive-covenant exposures that may affect purchase price, closing conditions, integration planning, or post-closing compensation design.
- Distinguish change-of-control benefits that are triggered by closing alone from benefits that require both a change of control and a qualifying termination.
- Read severance, bonus, equity acceleration, and tax gross-up or excise-tax mitigation provisions together, because they often interact economically even when housed in different documents.
- Treat the company-wide severance plan as potentially additive to individual agreements unless the documents clearly state otherwise.
- Read the equity plan together with award agreements, because plan defaults may be modified by award-specific terms.
- Assess non-compete and non-solicit provisions under the governing law specified in each agreement and note that enforceability can vary materially by jurisdiction and by covenant scope.
- Use the priority email as a source of internal deal priorities, but not as a substitute for the operative agreement text.
- Cite the controlling legal authority or contractual source for each legal proposition relied on; do not state enforceability or payment conclusions without naming the governing rule, statute, regulation, plan provision, or agreement language that supports them.

## 4. Analytical scaffolds

- Start with a document inventory and an issue map: who is covered, which documents govern each person, and which topics are addressed by which document.
- Review each executive agreement for base salary, target or guaranteed bonus treatment, severance trigger, severance formula, benefits continuation, equity treatment, good reason, cause, term, renewal, and any special termination rights.
- Compare each executive agreement against the standard form and flag deviations that increase cost, restrict termination flexibility, or create nonstandard obligations.
- Review the severance plan for eligibility, duplication or offset mechanics, change-of-control triggers, release requirements, and coordination with individual agreements.
- Review the equity plan and representative award forms for acceleration, vesting, settlement timing, assumption/substitution mechanics, cancellation rights, and treatment on termination or change of control.
- Aggregate deal-cost exposure by executive and by benefit type, then synthesize the likely closing or post-closing economic impact.
- Assess restrictive covenants executive by executive, focusing on scope, duration, geography, customer/employee non-solicit, and any jurisdiction-specific enforceability risk.
- For every issue, tie the point to a scale or threshold in the source documents, cross-reference the related clause or companion document, and state the transaction consequence.
- If multiple executives, plans, or award types are in scope, analyze each separately first and then summarize the common themes; do not collapse distinct provisions into a single generalized observation.

## 5. Vertical / structural / temporal relationships (only if applicable)

- Map the hierarchy: standard form baseline, then executive-specific departures, then company-wide severance plan, then equity plan, then award-level documents, then any internal email priorities.
- Resolve conflicts by asking which document governs the specific benefit or restriction and whether an individual agreement or award term overrides the general plan default.
- Track timing: pre-closing rights, closing-triggered rights, post-closing termination rights, payment timing, vesting dates, and any deadlines tied to notice, release execution, or cure periods.
- Distinguish economic exposure at signing, at closing, and after closing; a provision may matter only if a termination or acceleration event occurs after the transaction.

## 6. Output structure conventions

- Produce a single employment diligence memorandum.
- Open with a concise executive summary that identifies the highest-risk items, the aggregate deal-cost picture, and any document gaps.
- Include a short methodology or document-basis section that states the reviewed materials and any scope limits.
- Present an issue table or similar structured summary with a severity label for each issue, using a consistent ordinal scale defined once at the outset.
- Organize the body by topic or person in a conventional diligence order: company-wide severance, equity treatment, then executive-by-executive analysis, then restrictive covenants and standard-form deviations.
- For each issue entry, include: severity, the governing source, the comparison point if any, the quantified or scaled exposure available from the documents, the related document interaction, and the transaction consequence.
- End with a concise recommended actions section that assigns each action to a role and ties it to a transactional milestone or other timing anchor from the record.
- Keep the memorandum advisory in tone, but make the conclusions operative and specific; avoid narrative that merely restates the documents without analysis.