How a Retention Contract Impacts You Financially

If you are a key employee and your company is undergoing a merger and/or acquisition, you may be asked to sign a retention agreement. In fact, signing this contract may be a condition of your continued employment during the merger process and with the new entity. However, before you agree to a retention contract, it is imperative that you understand the leverage you have and the ways to best protect yourself in the future.

Below are a few considerations on how a retention agreement can impact you financially:

Employment. A retention agreement will set forth your continued employment through a certain date, or until a specified even occurs. This provides the employee a certain degree of certain employment while the company is in transition, allowing the employee to also search for new employment options and/or to decide if you want to remain with the new entity after the merger or acquisition.

Bonus Payment. Many retention contracts incentivize the employee by offering a lump sum payment as a bonus for signing the agreement. It is important to understand the terms of your receipt of the bonus payment and that the criteria you must meet are as objective as possible.

Retirement Benefits and Stock Options. If you are close to fully vesting for retirement benefits or pension, you may be able to request that the employer “bridge” you to vesting as part of your retention package. Additionally, if you have accrued stock options which vest over a certain number of years, you should request that your employer accelerate the vesting of your stock options.

Non-Compete/Non-Solicitation. If you have previously executed non-compete and/or non-solicitation agreements, you can use your retention contract to limit or clarify those agreements. This can make it simpler for you to find new employment when the time comes.

Health Insurance. We all know that health insurance (especially COBRA premiums) is expensive, but also very necessary. Your employer may agree to you continuing paying for health insurance at the rate you are currently paying for a certain amount of time after your employment ends.

When it comes to retention agreements, negotiation is crucial. Whether you are an executive or an employer considering a retention compensation package, let our knowledgeable and experienced attorneys assist you in negotiating the best possible terms for you. Contact our office today to schedule a consultation.