Income Continuation Protection Agreement is an agreement which is signed between a
company and an employee and sets out what the company agrees to offer to an
employee when there is a reduction in the role of the employee so as to protect the
employee's income. This document in its draft form contains numerous of the standard
clauses commonly used in these types of agreements; however, additional language
may be added to allow for customization to ensure the specific terms of the parties’
agreement are addressed. Small businesses can use this form if the role of an
employee is being changed in the future so that employee pay will be protected.
INCOME CONTINUATION PROTECTION AGREEMENT
THIS INCOME CONTINUATION PROTECTION AGREEMENT (hereinafter the
“Agreement”) is made effective the __________ day of __________, _____ by and between
_______________ [CORPORATION NAME], a ________________ [STATE OF
INCORPORATION] corporation, having its principal place of business at
_____________________ [COMPLETE ADDRESS] (hereinafter “Company”) and
___________________________, an individual residing at ______________ [COMPLETE
ADDRESS] (hereinafter “Employee”).
WHEREAS, Employee desires for financial protection in the event Company decides to
significantly decrease Employee’s current level of responsibilities (hereinafter “Company’s
WHEREAS, Company wishes provide for protection in that event.
NOW, THEREFORE the Parties hereby agree as follows:
I. In exchange for Employee’s delivery of the documents described in Clause II below,
Company will provide Employee with the following:
A. Continued Employment. Company will provide Employee with Continued Employment
(hereinafter “Continued Employment”) for two years; except, of course, Employee’s Continued
Employment will end if Employee accepts a position with another entity or company. During
the period of Continued Employment, Employee will remain an employee of Company and, as
such, will not be permitted to be associated with, or employed by, any other business without the
written consent of Company. During the period of Continued Employment, Employee’s duty, as
an employee, to maintain Company’s trade secrets and confidential information and not to
engage in any act inconsistent with an employee’s duty of loyalty shall continue. At the end of
Continued Employment, Employee and Company may negotiate a new agreement that is
acceptable to both parties.
B. Salary and benefits continued during Continued Employment. ____________________
[DESCRIBE WHAT EMPLOYEE WOULD BE RECEIVED AS SALARY DURING THE
CONTINUED EMPLOYMENT, INCLUDING AMOUNT AND FREQUENCY OF
PAYMENT] Employee will not be eligible to receive salary increases during Continued
During the period of Continued Employment, Employee will be eligible to participate in
whatever medical plans, long-term disability plans, and life insurance plans Company is
currently offering. However, Employee will not be eligible to receive a car allowance.
C. Additional benefits provided during the period of Continued Employment.
i. Stock Options. As long as Employee is still employed on the vesting date, Employee
will vest in fifty percent (50%) of the options (discounted or otherwise) that vest during
Employee’s period of Continued Employment. The remaining fifty percent (50%) will
be amended as noted in Clauses I.D. and II.C. below. All stock grants with vesting dates
beyond twenty-four (24) months of Company’s Decision (hereinafter the “Second
Anniversary”) will be canceled. Employee will not be eligible to receive any other stock
grants during the period of Continued Employment.
[ADD MORE BENEFITS IF APPLICABLE]
D. Additional benefits if Employee is still an employee on the Second Anniversary. If
Employee is still an employee on the Second Anniversary, then Employee will receive these
additional benefits on the Second Anniversary:
i. Stock Options. As indicated above in Clause I.C.i., 50% of Employee’s options
(discounted or otherwise) that would have vested during the period of Continued
Employment will be amended at the time of Company’s Decision to provide for a vesting
date on the Second Anniversary. All stock grants with vesting dates beyond the Second
Anniversary will be canceled. Employee will not be eligible to receive any other stock
grants during the period of Continued Employment.
II. In exchange for the above, Employee agrees to provide Company with the following
documents at the time of Company’s Decision:
A. Resignation of officer status. Employee will submit a written resignation from Employee’s
position as a ___________________ [JOB TITLE].
B. Legal release. Employee will sign a waiver and legal release of all claims which will include
a confidentiality provision and a non-disparagement clause in a form acceptable to Company.
C. Amended stock grants. Employee will sign a document canceling all stock options which
have a vesting date more than twenty-four (24) months from the date of Company’s Decision.
Fifty percent (50%