Severance Plans and Arrangements

Posted on March 15, 2013 by

Golden ProvisionWith the $56 million Golden Parachute for Heinz CEO, and similar packages for the executives of companies like GE, Exxon, Mobil Corp., AT&T and Home Depot, Inc., being in the news recently, a lot of focus has been on these packages usually reserved for the highest paid in a corporation. But what exactly is a Golden Parachute?

A severance provision in an employment agreement, or a separate severance contract provides for specified compensation in the event the executive is involuntarily terminated (other than for “cause”).  It can be a golden parachute or a non-golden parachute contract as described below:

Golden Parachute
A Golden Parachute provides a generous severance package to top executives in the event of a change in control transaction; merger, acquisition, etc.  It can have a single trigger, allowing the executive to receive the severance package when the change in control occurs, even if the executive retains his/her position; or a double trigger where the severance is payable upon change of control and loss of employment.

A typical Golden Parachute payment may include a value of one year’s base salary, an award equal to a previous incentive compensation, and/or an amount equal to the number of vested and un-vested shares in a long-term stock option award multiplied by the “spread” calculated by subtracting the stock price under the terms of merger from the option exercise price.

Golden Parachutes are regulated by Code Section 280g, and have complicated requirements, so you should consult an attorney prior to negotiating.

Since Golden Parachutes have become  controversial and as evidenced by the recent SEC regulations regarding say-on-pay and the shareholder vote required  on Golden Parachutes, their use will likely decline. However, they do still have some advantages such as helping to retain key executives during a restructuring and some argue they help executives remain objective when considering a merger or acquisition that could lead to their termination.

However, what if you are not the Heinz CEO, can you get in on this “walk away” package?Maybe.

Silver ParachuteGolden Parachutes are mostly reserved for the highest officers of the corporation. A Silver Parachute however is a severance agreement that persons in management positions can negotiate for.  It has the similar single and double trigger options as the Golden Parachute, but with less generous benefits.

Tin ParachuteAs you can guess, the tin Parachute is the severance package for non-management positions and is typically less generous than those above.

Author: Jennifer Trowbridge, Stoecklein Law Group, LLP.

Photo Credit to http://www.suitsbysuits.com/Why_Golden_Parachutes

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Solar Sisters Light Up Africa

Posted on January 28, 2013 by

Reblogged from Streams of Conscience:

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Solar Sister is a network of women selling solar lighting to poor communities.  The women make a commission on each sale, with most of them spending the extra income on education for their children.

Using an Avon-style women’s distribution system, Solar Sister trains, recruits and supports female entrepreneurs in East Africa to sell affordable solar lighting and other green products such as solar lamps and mobile phone chargers.  

Read more… 480 more words

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Five Profitable Businesses You’ve Never Thought Of

Posted on January 18, 2013 by

Reblogged from luisylin:

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How are you going about making money? What if you could make money with some of your craziest ideas? Here are five of my favorite off-the-wall businesses:

Game Truck – In 2006, Scott Novis, fed up with the experience had at his son’s 4th birthday party in a pizza arcade, began a business called Game Truck to help ensure better parties for young people.

Read more… 776 more words

Proof the simplest business idea may be the greatest!
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FINRA’s Crowdfunding Portal Form

Posted on January 18, 2013 by

Are you anxiously awaiting the Crowdfunding final rules? Are you considering operating as a Crowdfunding Portal?

If so, you should consider filling out and submitting this form:

To help FINRA develop rules that accurately  reflect the funding portal community, FINRA is requesting information like:

  • Ownership and legal Status of your Funding Portal (“FP”);
  • Funding to date;
  • Management; and
  • Business Model.

The completed form should be returned to fundingportals@finra.org

Once the final rules are released you will still need to apply your FP for FINRA membership, but hopefully the interim form information and the comments being received will expedite the rule-making process.

Author: Jennifer Trowbridge, Stoecklein Law Group, LLP

Posted in Crowdfunding, Emerging Growth Companies, JOBS Act, Social Media | Tagged , , , , , , | Leave a comment

Form S-1 vs. Form 10- What’s the Difference?

Posted on December 18, 2012 by

private-or-public-company

Whats the difference between a Form S-1 and a Form 10?

In short, a Form 10 is used to register a class of securities (ex. common) under Section 12(b) or (g) of the Securities Exchange Act of 1934 while the Form S-1 is used to register specific shares of the company or its current shareholders shares for sale/resale and subjects the Company to the reporting requirements of Section 15(d) Securities Exchange Act of 1934.

But what does that mean to you if you are looking to “go public?”

Form 10:

  • Filing a Form 10 does not “take you public.”  A Form S-1 would have to be filed following the Form 10 if you want to register specific shares for investors and others to purchase; enabling a trading market.
  • Any company whether public or not can use a Form 10 to register a class of securities.
  • a Form 10 automatically becomes effective 60 days following filing, regardless of any outstanding comments from the SEC reviewer.
  • Upon effectiveness, the Company is subject to the SEC’s reporting requirements; meaning they must file annual reports on Form 10-K, quarterly reports on Form 10-Q and periodic reports on Form 8-K.
  • The Company is also subject to the proxy rules of Section 14.

Form S-1:

  • A Form S-1 or Registration Statement is used for an Initial Public Offering (IPO), Direct Public Offering (DPO), Selling Shareholder, Private Investment in Public Equity (PIPE) or Equity Line.
  • The S-1 registers and offers specific shares for sale to the public, thus “taking the company public.”
  • Upon filing of the S-1, the SEC will issue comments within 30 days. It is not effective until all the comments are answered to the satisfaction of the reviewer. This may take 3 to 6 months (or greater), depending on the breadth and number of comments.
  • Upon effectiveness, the company is subject to reporting requirements; meaning they must file annual reports on Form 10-K, quarterly reports on Form 10-Q and periodic reports on Form 8-K.
  • Effectiveness enables the Company to apply for listing on an OTC Markets Board or other Exchange.

If you are considering going public by way or reverse merger with an existing shell it is important you know the difference between a Form 10 company and a shell that has filed an S-1.  It will make a difference in the filings and steps that need to be taken.

Author: Jennifer Trowbridge, Stoecklein Law Group, LLP

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SEC Conflict Minerals Compliance Flowchart

Posted on December 11, 2012 by

feat-conflict-minerals

Thank youSquire Sanders for releasing this interactive flowchart on the Conflict Minerals disclosure requirements for publicly traded companies.

If your company uses tantalum, tin, gold, or tungsten sourced from the Democratic Republic of the Congo, Angola, Burundi, Central African Republic, the Republic of the Congo, Rwanda, South Sudan, Tanzania, Uganda and Zambia in the products it manufactures or contracts to manufacture, then you need to make certain disclosures as described here. The Squire Sanders flowchart is a fantastic tool to help ensure compliance.

Author: Jennifer Trowbridge, Stoecklein Law Group, LLP

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Is your Business Ready for Obamacare?

Posted on November 27, 2012 by

The election is over, the dust is settling and out of the fog comes the realization that “Obamacare” or the Affordable Health Care Act will move forward. So what do you as a business owner need to know and what do you need to prepare for, going into 2013?

  • Additional Medicare Tax: There will be an increase of 0.9% on the employee portion of the hospital insurance tax portion of FICA for wage earners who earn above a threshold amount for tax years beginning after 12/31/2012.  The threshold for joint returns or surviving spouse is $250,000. For a married individual filing separately, it is $125,000, and for any other filer, the threshold is $200,000.
  • Medicare Tax on Unearned Income: Individuals making $200,000 or joint filers making $250,000 will pay an additional 3.8% Medicare payroll tax in unearned income. Excluded from the increased tax is Interest on tax-free bonds veteran benefits, and gain from the sale of a principal residence that are excluded from gross income are not considered net investment income for purposes of the additional tax, nor are qualified retirement plan and IRA contributions.
  • Flexible Spending Account Contribution Limits: The contributions to Flexible Spending Accounts cannot exceed $2,500 per year.  After December 31, 2013, the amount will increase.
  • Employer Retiree Subsidy: In 2013, Employers will no longer be able to receive a subsidy to and also claim tax deduction for providing prescription coverage to retirees. Instead the amount the Employer is able to deduct will be reduced by the amount of the federal subsidy received.
  • State Based Insurance Exchange: State health exchanges will be set up to facilitate the purchase of qualified health plans  and provide for a Small Business Health Options Program  to assist small employers in enrolling their employees in qualified plans. Beginning in 2017, states may allow employers of any size to offer coverage through an exchange.
  • Notice of Exchange: By March 1, 2013, employers will be required to provide all new hires and current employees written notice about the state health benefit exchanges and the consequences if an employee decides to purchase a qualified health plan through one in lieu of employer-sponsored coverage.
  • W-2 reporting: Tax form W-2s issued in January 2013 for wages paid in 2012 must for the first time include a line showing the benefit employees receive from their employer-sponsored health care. The provision is an attempt to make health-care benefits and spending more transparent.

For more information and guidance see www.healthcare.gov/law. There you can read the full text of the law, view a timeline and find other helpful resources.

Author: Jennifer Trowbridge, Stoecklein Law Group, LLP

Posted in Small Business Management, Legislation, Affordable Health Care Act | Tagged , , , , , , , | Leave a comment