Transaction Bonus Agreement
(Non-executive Employee)

Summary

This template is a transaction bonus agreement that grants a bonus to an at-will, non-executive employee of a target company in connection with an M&A transaction. This template includes practical guidance, drafting notes, alternate clauses, and optional clauses. A target business's employees play an important role in ensuring a seamless closing process in all kinds of M&A transactions, and can be critical to the continued success of the business post-closing. Employees may be asked to assume deal-related functions and to support management executives and the company's legal counsel in responding to due diligence requests, preparing documents, and carrying out ownership transition processes, in addition to their regular responsibilities. Where deal consideration includes contingent consideration such as an earn-out payment, retaining specific revenue-generating employees that pose a flight risk may be a key factor in the achievement of performance targets. For these reasons, target companies in both public and private M&A transactions sometimes decide to reward key employees for their pre-closing contributions and to incentivize their continued employment with the business after a deal has closed. Because transaction bonuses for at-will employees are discretionary, this template favors the target company/employer over the recipient/employee. This is a non-jurisdictional template that assumes that (1) a definitive acquisition agreement has already been signed (or that signing and closing will occur simultaneously in a deal where a definitive acquisition agreement is nearly final), (2) the employee is not a "disqualified individual" for purposes of Section 280G of the Internal Revenue Code, and (3) the employee is an at-will employee. This template also includes a form of release agreement as an exhibit to the transaction bonus agreement. You may modify the provisions of the release agreement to comply with any jurisdiction-specific requirements applicable to your transaction or the bonus recipient. For a template transaction bonus agreement that you can use for executive employees which does not assume that a transaction agreement has been signed and does not include a release agreement, see Change-in-Control Agreement. For commentary and further guidance on preparing transaction bonus and change-in-control bonus agreements, see Change-in-Control Arrangement Drafting Considerations. Click here to see recent examples of transaction bonus and change-in-control agreements in Market Standards, the Practical Guidance database of publicly filed M&A deals that enables users to search, compare, and analyze transactions using 150+ M&A deal points to filter search results. You can customize any search to your needs by adding filters or modifying the search criteria.