Retention & Change In Control Agreements
Outten & Golden attorneys review retention and change in control agreements, advise our clients about the meaning and implications of their complex provisions, and negotiate improvements in their terms. We are familiar with many different types of retention agreements and change in control agreements, and can often spot and correct provisions that would otherwise cause our clients problems in the future.
Retention and change in control agreements usually serve at least two purposes for employees: first, to provide compensation packages and otherwise protect them in the event of a termination; and second, to protect them from having to continue employment without adequate compensation if a demotion or other adverse employment action occurs during the reorganization. Outten & Golden attorneys understand complex tax regulations such as IRC section 409A and IRC section 280G, known as the Golden Parachute Tax, and work with tax experts to insure that our clients’ compensation and equity are secure after a transaction and that no undue tax penalties will be imposed on them as a result of non-compliance with the law.
Employers offer retention and change in control agreements to induce employees to stay with the employers for a specific duration. Such agreements typically arise when uncertainty exists with respect to the continuity of the business in its present form or with respect to the security of the employee’s employment, such as when the employer is experiencing financial problems, is the subject of legal or regulatory proceedings, or is/may be going through a restructuring or change of control (e.g., merger or sale). In such circumstances the employer may be concerned that key employees will leave for other employment, which could adversely affect the employer’s ability to run its business or the value of the company to prospective purchasers. Accordingly, a typical retention agreement will provide that the employee will receive a special bonus (in addition to normal compensation) if he or she stays with the employer through a specific date. Outten & Golden attorneys can help an employee who is offered such an agreement—or who would like to propose such an agreement to an employer—to optimize the terms and conditions of the deal.