An Executive Compensation Agreement is an agreement between a company and a potential executive whom the company would like to hire for employment. Usually the hiring company will want the executive to promise not to join a competitor of the company, or compete for business on her own, for a period of time after leaving the company. This period of time is usually (1) year, but can be longer. The covenant not to compete must also be limited to a certain territory.

A typical Non-Compete clause will read as such:

Article 4. Restriction on Competition, Interference and Solicitation.

In recognition of the considerations described in this document and all attachments, EXECUTIVE covenants and agrees that during the Term and for a period of one (1) year after the termination of his contract hereunder, EXECUTIVE will not, directly or indirectly,

• Enter into the employ of, or render any services to, any person, firm or corporation engaged in any business competitive with the business of COMPANY in any part of the territory in which EXECUTIVE is actively engaged in business on the date of termination;
• Engage in any such business for his own account;
• Become interested in any such business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, trustee, consultant, advisor, franchisee or in any other relationship or capacity; or
• Interfere with COMPANY’s relationship with, or endeavor to employ or entice away from COMPANY any person, firm, corporation, governmental entity or other business organization who or which is or was an employee, customer or supplier of, or maintained a business relationship with, COMPANY at any time (whether before or after the Term), or which COMPANY has solicited or prepared to solicit; provided, however, that the provisions of clause;i) Shall not be deemed to preclude EXECUTIVE from engagement by a corporation some of the activities of which are competitive with the business of EXECUTIVE if EXECUTIVE’s engagement does not relate, directly or indirectly, to such competitive business, andii) Nothing contained in this Section shall be deemed to prohibit EXECUTIVE from acquiring or holding, solely for the purpose of investment, publicly traded securities of any corporation of which some of the activities of which are competitive with the business of EXECUTIVE so long as such securities do not, in the aggregate, constitute more than five percent (5%) of any class or series of outstanding securities of such corporation.

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