Scenario 02

---
name: review-employment-diligence-scenario-02
task_id: corporate-ma/review-employment-diligence/scenario-02
description: Guides preparation of a buy-side employment diligence memorandum for an acquisition where executive employment agreements, severance plans, equity plans, and standard form agreements must be systematically assessed.
activates_for: [planner, solver, checker]
---

# Skill: Employment Agreement Due Diligence Review

## 1. Subject-matter triage

- Treat the priority email as the routing document: use it to identify which executives, plans, and deviations require focused attention before doing a full-form review.
- Distinguish the document stack into: individual executive agreements, the company-wide severance arrangement, the equity plan and any representative award forms, the standard form agreement, and any priority correspondence that flags exceptions.
- If only one executive or one plan is actually in scope, say so expressly and explain why; otherwise enumerate the covered agreements and review each one separately.

## 2. Failure modes the skill is correcting

- Executive agreements are reviewed one by one without synthesizing the combined change-of-control exposure as a transaction cost that may affect economics and closing planning.
- Individual agreements are assessed in isolation from the severance plan, even though the plan may expand or override benefits promised elsewhere.
- The equity plan is read without checking whether award-level provisions depart from the plan’s default change-of-control treatment.
- The standard form is not used as a baseline, so deviations in negotiated executive agreements are missed.
- Restrictive covenants are discussed in the abstract without tying them to the governing law for each agreement or the likely post-closing enforceability regime.
- Priority-email flags are not carried through the memo, causing the most sensitive executives or provisions to be buried in a generic summary.
- Issues are described, but the memo stops short of showing size, interaction, and deal consequence.

## 3. Legal frameworks / domain conventions that apply

- Executive diligence scope ordinarily includes base salary, target and guaranteed bonus treatment, severance on termination, change-of-control benefits, good reason and cause definitions, equity treatment, restrictive covenants, confidentiality, and any reimbursement or benefits continuation obligations.
- Change-of-control analysis should distinguish single-trigger from double-trigger structures and identify whether acceleration or cash-outs occur at signing, closing, or after a qualifying termination.
- Company-level severance arrangements can create obligations independent of individual contracts and must be read together with any “other arrangements” carveouts, integration clauses, or offsets.
- Equity plans generally control award treatment, but award agreements may modify default rules; confirm whether vesting acceleration, cancellation, assumption, replacement, or cash settlement applies.
- Non-compete and non-solicitation provisions must be assessed under the governing law clause and the current enforceability regime for that jurisdiction, including any statutory limits on duration, scope, consideration, or employee class.
- Standard-form comparison is a core diligence tool: deviations may signal negotiated protections, hidden liabilities, or inconsistent drafting that affects interpretation.
- Where the source documents identify controlling law, statutory limitations, or required notices, use those authorities and apply them to the relevant agreement instead of giving a generic enforceability comment.

## 4. Analytical scaffolds

- Start with the priority email: extract the specific executives, provisions, and sensitivities that the deal team wants elevated.
- Build a document inventory and review each item against the same checklist so no agreement, plan, or exhibit is missed.
- For each executive agreement, extract compensation, severance trigger, severance amount or formula, bonus treatment, equity treatment, restrictive covenants, and any special termination rights.
- Compare each executive agreement to the standard form and identify every material deviation, then assess whether it increases cost, narrows protections, or creates inconsistency.
- Review the severance plan separately, then test whether any executive agreement supplements, duplicates, offsets, or conflicts with it.
- Review the equity plan and any representative award documents to determine what happens on a change of control and whether the plan matches the individual agreements.
- For each issue, state: the relevant scale or exposure reflected in the documents, the cross-document interaction, and the downstream deal consequence.
- Organize findings by executive and by plan so the buyer can see both individual and aggregate risk.
- Where the analysis involves multiple executives or multiple award types, enumerate them first and then analyze each one on the same criteria.

## 5. Vertical / structural / temporal relationships

- Map the timing of every benefit: signing, closing, termination before closing, termination after closing, and any post-closing vesting or payment period.
- Separate pre-closing liabilities from post-closing obligations, and distinguish obligations that are triggered automatically from those that require a termination or other condition.
- Show how individual agreements sit above or below the company-wide plan: whether they override, supplement, or are limited by it.
- Track whether a change-of-control benefit depends on a qualifying termination, a discretionary board action, or an automatic acceleration event.
- If the source documents cover different employee classes or award types, keep those vertical strata separate rather than blending them into one summary.

## 6. Output structure conventions

- Produce one employment diligence memorandum only.
- Use a conventional memo shape: short executive summary, key transaction exposures, plan-by-plan analysis, executive-by-executive analysis, restrictive covenant assessment, and a concise action-oriented closing.
- Include an issue table or bullet list with a uniform severity label for each item, using a stated ordinal scale applied consistently throughout.
- For each issue, include the size or scope indicated by the source documents, the document or provision it interacts with, and the buyer-facing consequence.
- Tie legal conclusions to the relevant governing authority named in the documents or to the controlling statute, regulation, rule, or doctrine applicable to the agreement.
- End with a clear Recommended Actions section that assigns each action to counsel, management, or another responsible business owner and anchors it to the signing, closing, or diligence timeline.
- Keep the memo analytical and transactional; do not reproduce the source documents verbatim except where necessary to surface critical language from them.