Severance in contract

[dwhoward69]

Arizona.

Here’s my situation.

Company “X” is owned by Private Equity “A”. Private Equity A is selling the Assets of Company X to Private equity “B” that also has Company “Y” that X assets would be merged with.

More than likely, Company X remains as a bankrupt entity, assumed managed by Private Equity A still.

My offer letter states this:

“Subject to the terms and conditions of eligibility for your receipt of severance payments under this Letter, the Company shall pay you, as severance, and amount equal to six months Base Salary (“Severance Pay”) if there is a change in control of (Company X), such as that (Private Equity A) and its affiliates no longer own at least 50% of the voting equity in the Company, and (i) you are not offered a position with the go forward company with equivalent authority, duties, and responsibilities, and (II) there is a reduction in your Base Salary or Annual Bonus.”

I have been offered a position with reduced title, reduced pay, and no annual bonus.

Do I have a claim to my severance agreement? Is it feasible to get this?

 

[Zigner]

Arizona.

Here’s my situation.

Company “X” is owned by Private Equity “A”. Private Equity A is selling the Assets of Company X to Private equity “B” that also has Company “Y” that X assets would be merged with.

More than likely, Company X remains as a bankrupt entity, assumed managed by Private Equity A still.

My offer letter states this:

“Subject to the terms and conditions of eligibility for your receipt of severance payments under this Letter, the Company shall pay you, as severance, and amount equal to six months Base Salary (“Severance Pay”) if there is a change in control of (Company X), such as that (Private Equity A) and its affiliates no longer own at least 50% of the voting equity in the Company, and (i) you are not offered a position with the go forward company with equivalent authority, duties, and responsibilities, and (II) there is a reduction in your Base Salary or Annual Bonus.”

I have been offered a position with reduced title, reduced pay, and no annual bonus.

Do I have a claim to my severance agreement? Is it feasible to get this?

You were very clear that only the assets are being sold. The company has not changed ownership.

 

[davew128]

You were very clear that only the assets are being sold. The company has not changed ownership.

....not so fast. While in a literal sense only assets were sold, often times certain liabilities are either attached to assets (such as contractual employee matters) or the buying company indemnifies the seller for the liability.

 

[Zigner]

....not so fast. While in a literal sense only assets were sold, often times certain liabilities are either attached to assets (such as contractual employee matters) or the buying company indemnifies the seller for the liability.

...not that any of that was mentioned here, of course. The OP was very specific in saying that only the ASSETS were sold and that no ownership was transferred. Employee contracts are not considered assets.

 

[davew128]

...not that any of that was mentioned here, of course.

Unless OP was in management, OP would have no idea whatsoever.

The OP was very specific in saying that only the ASSETS were sold and that no ownership was transferred.

And often times liabilities are transferred or indemnified.

Employee contracts are not considered assets.

No, they are LIABILITIES. Did you even understand my post?

 

[Zigner]

Unless OP was in management, OP would have no idea whatsoever.

And often times liabilities are transferred or indemnified.

No, they are LIABILITIES. Did you even understand my post?

Dave - you're really grasping at straws. I suppose we could fabricate out of whole cloth a special clause that was placed in the OP's contract (in invisible ink no less) that gives the OP a billion dollars and the beach house in Bermuda.

 

[LdiJ]

Arizona.

Here’s my situation.

Company “X” is owned by Private Equity “A”. Private Equity A is selling the Assets of Company X to Private equity “B” that also has Company “Y” that X assets would be merged with.

More than likely, Company X remains as a bankrupt entity, assumed managed by Private Equity A still.

My offer letter states this:

“Subject to the terms and conditions of eligibility for your receipt of severance payments under this Letter, the Company shall pay you, as severance, and amount equal to six months Base Salary (“Severance Pay”) if there is a change in control of (Company X), such as that (Private Equity A) and its affiliates no longer own at least 50% of the voting equity in the Company, and (i) you are not offered a position with the go forward company with equivalent authority, duties, and responsibilities, and (II) there is a reduction in your Base Salary or Annual Bonus.”

I have been offered a position with reduced title, reduced pay, and no annual bonus.

Do I have a claim to my severance agreement? Is it feasible to get this?

Wait a minute dave and zig...I am not at all sure that its clear what is happening here, and how it related to the OP's offer letter.

Ok...we all know that its not uncommon for a company to buy only the assets of another company. Physical assets, name, contracts, goodwill etc. This is commonly done when the buyers feel that the company is viable going forward but they are unwilling to assume the debts of the company. They generally pay more for the assets than they would for the company as a whole. (often very much more) They get to continue on in the public's eyes as being the same company, without the prior company's debt burdens...even though legally they are a completely new company. The prior company's actual owners (because the company still exists legally) have to deal with the debt issues.

Based on the somewhat odd wording of the offer letter, I don't think its entirely clear whether or not any severance might be due to the OP. I think that rather than battling the issue back and forth here, it would be far wiser to advise the OP to consult a local attorney who can review all of the facts of the matter.

 

[OHRoadwarrior]

It appears clear that regardless of the assets and normal liabilities eliminated/liquidated, as long as Private Equity A maintains 50% of the voting equity the remaining company, the severance is not triggered.

 

[davew128]

Dave - you're really grasping at straws. I suppose we could fabricate out of whole cloth a special clause that was placed in the OP's contract (in invisible ink no less) that gives the OP a billion dollars and the beach house in Bermuda.

you ever been involved in m&a deals? 1) sometimes employment contracts have clauses relative to company buyouts. 2) Google asset sales and you will see the issue of avoiding liabilities for the buyer is not so clear cut as you think it is.