Legal Question in Business Law in California
Severance/Release Agreement
I received a release letter/severance letter from the company I work for. I was told that I could negotiate the agreement. When I tried the (the company) became rather rude. I was at this compoany for 2 years 6 months of which I was a temp on a working interview. they are offering 3 weeks of sever ance. I asked for four (this is when they became rude).
During my tenure there I received 2300 stock options. 267 of which are vested. In the release agreement it states that I get the vested stock options. I received them at 42.34 per share, however, the stock price (nasdaq) has dropped to 26 dollars. How does this affect me?
My intention is not to sue this company but receive a fair release settlement. any advice is appreciated. This company is headquarted in CA.
Thank you
1 Answer from Attorneys
Re: Severance/Release Agreement
When the company says "you can negotiate the agreement" they really mean "we can't force you to sign this against your will." However, they can still fire you (unless you have a contract).
The terms of the severance probably aren't really negotiable in any substantive way. There may be some tradeoffs such as an option to continue certain benefits at your expense vs. dropping them at once, but why would they give you more severance just because you asked??? This is a suffering company, not a charity.
The market value of the options being about 60% of the exercise price affects you thusly: you are holding options which are nearly worthless. That is nobody's fault, just bad luck.
My advice is to make sure you get all your accrued vacation, pension, holiday etc. benefits and probably consult with a stockbroker and a tax adviser about the options....even if they are "under water" there may be a market, and you should check to see whether there is any hidden tax liability associated with them. I have heard stories about options being treated by the IRS like untaxed income even though currently not valuable.
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