If you are working for a company that is merging with or acquiring another company, it can mean that your future is unclear. If you are a key employee of your company, you may be asked to sign a retention agreement as a condition of your continued employment with the newly formed company. Whether you should sign a retention agreement depends on a variety of factors. It is essential to confer with an attorney experienced in reviewing, drafting and negotiating this type of contract. Your lawyer can help you understand what leverage you have and ensure that your interests are protected.

The following are a few examples of provisions typically found in retention agreements that are beneficial to the key employee:

● Continued Employment. To induce the key employee to remain with the company during the transition period, the company may guarantee employment for a spec period or until a specified event occurs. The employee’s continued employment is often subject to a “for cause” termination provision, which means the employee can be terminated prior to the contracted date or event, but only if the employee engaged in conduct that triggered termination for cause. Thus, the benefit of this provision to the employee is assured employment during a period where the employee would otherwise search employment options.

● Bonus Payment. Retention agreements often offer the incentive of a bonus payment to the key employee. The lump sum payment is usually tied to the employee working through the contracted period and other conditions. It is important to review the conditions for receiving the bonus payment and confirming that they are objective, fair and not entirely within the control of the employer. You do not want your employer to decide whether you have met subjective criteria to determine whether you qualify for the bonus payment.

● Retirement Benefits. If you are close to becoming vested in your retirement benefits, your employer may agree to bridge you to eligibility as part of your retention agreement.

● Stock Options. If you have accumulated stock options as part of your compensation package that vest over years, your employer may include a provision in the retention agreement that accelerates the vesting of that stock. This can significantly increase the value of your compensation package. Additionally, you may also be able to negotiate an extended period for you to exercise your stock options, which allows you to sell your stock at the most advantageous time.

● Non-Competition/Non-Solicitation Terms. If you previously signed a non-competition or non-solicitation agreement with your employer, you may be able to negotiate more favorable terms as part of your retention agreement. This can be important in helping you find a new job once your retention agreement expires.

● Health Insurance. We all know that health insurance is expensive, so it is important to request that your employer pay COBRA health insurance premiums as part of the severance agreement or to allow you to pay for your health insurance coverage for a specified time at the same rate as you did while employed.

Mailly Law is knowledgeable and experienced in handling retention agreements. We will help you understand all your options and aggressively negotiate every benefit and protection in your favor. Contact us today to schedule your appointment.