The Executive Term Sheet: Severance Protections, Acceleration & Equity Refreshers

When accepting an executive role, the title and initial base salary are only the surface of the agreement. Because senior leaders operate in high-volatility environments subject to activist investor pressure, M&A transactions, and board turnover, downside contract protection is vital.

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1. Key Term Sheet Clauses Every Executive Must Negotiate

Clause 1: Double-Trigger Equity Acceleration Ensure that in the event of a change of control coupled with termination without cause or resignation for Good Reason, 100% (or minimum 75%) of unvested equity options or RSUs immediately accelerate.

Clause 2: The "Good Reason" Resignation Definition Ensure "Good Reason" covers: - Material reduction in base compensation or target bonus. - Material diminution of authority, duties, or reporting line (e.g. reporting to an interim VP rather than the CEO/Board). - Required geographic relocation of more than 35 miles.

Clause 3: Severance Continuation & Pro-Rated Bonus Standard executive packages provide 6 to 12 months of base salary continuation, full COBRA healthcare coverage, and a pro-rated annual performance bonus for the current fiscal year.

Clause 4: Extended Post-Termination Exercise Window Negotiate an extended option exercise window (up to 3 to 7 years instead of standard 90 days) so you are not forced into high out-of-pocket tax liabilities if you depart before a liquidity event.