Change In Control Agreements
Our attorneys make sure you are protected
In business, it is not unusual for companies to be merged or acquired. It’s also not unusual for new owners to want to make changes. Some of those changes may involve putting in a new management team, resulting in executives losing their jobs. That’s why it’s important to have a change in control agreement in place.
The experienced employment attorneys at Gibson Law, LLC used to represent employers, including cases involving separation and severance agreements. We know the issues that can come up when there has been an acquisition or merger and how executives can be impacted. Now, we help executives negotiate change in control agreements to provide them with financial security.
We consider your financial future
Change in control agreements are contracts that outline pay and benefits an executive will receive in the event of a change in company ownership. They are also sometimes known as “golden parachutes,” as they provide protection for executives if they are forced out after a company takeover.
The definition of a “change in control” can vary and will be defined in the agreement. Generally, it means a person or entity has acquired a certain percentage of the company’s voting common stock, there has been a change in control or ownership of substantial assets or there has been a change in a majority of the board of directors.
The agreement will also specify when it is triggered. A “single trigger” means it takes effect as soon as there has been a change in control, and the executive can choose to leave at any time. A “double trigger,” which is more common, takes effect after there has been a change in control and the executive’s employment is terminated after a certain amount of time. There may also be a “modified trigger” which sets an open window period for the executive to resign.
Make sure your interests are protected
A change in control agreement may address:
- Compensation – The amount of pay an executive receives after termination is negotiable, but it is typically equal to two to three times the executive’s annual salary and may also include an additional bonus.
- Retention bonus – The new owners of a company may want executives to stay on for a certain amount of time to aid the transition. A retention bonus is a pay increase during the period, often 10-15 percent (or more) of the executive’s annual salary.
- Medical benefit – Following termination, an executive will continue to receive medical benefits for an agreed-upon amount of time.
- Retirement plan benefits – An executive may be credited for an addition 2 to 3 years of age and service in a supplemental retirement plan (SERP), receive a matching contribution in a 401(k) plan or get acceleration in vesting in company stock.
Change in control agreements are complicated. It’s important to make sure the language is clear to all parties involved so there is no confusion. That’s why it’s important to talk to an experienced employment attorney who can negotiate an agreement that meets your needs to ensure your financial security.
Learn more about how we can help. Contact us for a consultation with a member of our legal team at our Cincinnati or Dayton office.