If you are reviewing a change of control (“COC”) agreement with your company, it is critical to confer with an experienced attorney regarding your options. Below are a few important questions to ask your lawyer:
● Is my current change of control agreement valid?
It is important to have your attorney review all your current employment documents to determine if you have a valid COC. For example, a COC provision can be included in an employment contract, stock agreement, corporate policies, or even in your employee handbook. Your lawyer can review everything you have received from your employer to determine if you have any COC rights or protections.
●If I do have COC rights, what does it mean?
It is essential that you understand how your company defines change of control. Does it include a change in ownership of the company by a certain percentage of shares? Does a substantial transfer of the company’s assets fall within the definition? It is important to have a clear understanding of how your COC provision defines the term.
●What are the COC triggers?
Your attorney should fully explain when and how your COC protections will take effect. Many COC contracts require more than one “trigger” to occur before it becomes effective, so it is critical to understand what must occur before you receive the benefits of the provision.
●Once the COC has been triggered, what is the deadline to elect benefits?
There is typically a specified amount of time in which you must elect to take the COC benefits, or you will lose them. You do not want to miss this deadline!
●What are my COC benefits?
Some of the common COC protections include continued salary payments and benefits, bonuses, equity and pension or retirement payments.
●How will the COC payments be made?
Will you receive your payment in a lump sum, over time (similar to a normal salary), or will you only receive it until you are employed elsewhere?
●Do I have a non-compete agreement?
Your lawyer will need to determine if any of the documents you have signed with your employer contain a valid and enforceable non-compete agreement, especially if the COC has general language stating you must comply with all agreements you have made with the company. This is particularly critical for a California based executive, because most non-competes are unenforceable in California.
●Will I receive accelerated vesting of my unvested stock?
This is an important financial consideration and you may want to confer with an accountant, as well as your attorney. You want to receive all awards you are entitled to and ensure that you do not miss any deadlines. You will also want to understand any tax consequences.
The above are just a few examples of questions you should discuss with your attorney. The more you analyze and understand your change of control provisions, the more you will benefit from it. Let our experienced and knowledgeable attorneys help you. Contact Mailly Law today.