Contact: Patrick McCabe, Paul Borden or Mike Frank
Morrison & Foerster regularly counsels clients regarding qualified employee benefit plans, including plan design and administration,
analysis of the income tax consequences of plan funding and distributions and application of ERISA fiduciary standards.
The firm is actively involved in counseling clients regarding the employee benefits and executive compensation aspects of
acquisitions, mergers and reorganizations, providing advice relating to the structuring of transactions in order to avoid
or minimize employee-related liabilities and structuring and implementing benefit plans to satisfy legal requirements as well
as human resources objectives.
Morrison & Foerster represents both employers and individual executives in connection with a variety of stock-based compensation
arrangements, deferred compensation agreements and golden-parachute contracts.
Representative Matters
Our executive compensation group recently prepared an equity appreciation rights plan for a joint venture between two multinational
companies. 2,000 to 3,000 employees of the joint venture are expected to participate in the plan. “Units” will be awarded
under the plan to grantees for no consideration, but the units are nontransferable and subject to the restriction that the
units must be returned to the joint venture if the grantee terminates his or her employment relationship before the units
vest. No units issued under the plan will vest until the earlier to occur of a date certain or a liquidity event. Upon the
occurrence of a liquidity event (or in the event a liquidity event has not occurred by the date certain), grantees may redeem
their vested units in exchange for a per unit cash amount from a payout pool. Where no liquidity event has occurred, the
payout pool will be determined based on 20% of aggregate EBIT for the joint venture. In the event a liquidity event occurs,
the payout pool will be determined based on a combination of the implied value of the joint venture in the liquidity event,
the joint venture’s PE multiple and net income of the joint venture for the prior calendar year.
Our executive compensation group recently prepared an equity incentive plan for an LLC with respect to certain LCC interests.
The plan provides for the grant of options, restricted LLC interests, phantom LCC interests, distribution equivalent rights
and rights based on the appreciation in the value of LLC interests. Awards may be granted under the plan to employees, directors
and consultants of the LLC. No options issued under the plan will be exercisable prior to the conversion of the LLC from
an LLC to a C-corp. The equity incentive plan also included a bonus program that would permit certain eligible employees
of the LLC to receive a percentage of their annual bonus compensation in restricted LLC interests issued under the equity
incentive plan.
Our executive compensation group recently advised a client with respect to the issuance of stocks options to employees of
a joint venture between the client and another multinational company. The parent companies of the joint venture agreed that
the joint venture would pay cash to the issuer of the stock options in an amount equal to the “value” of the stock options
granted to the employees of the joint venture. Our executive compensation group provided advice regarding the risks and merits
of alternative methods of valuing the options. The two parent companies ultimately determined that the joint venture would
pay the Black Scholes value of the options as determined at the time of grant. Our executive compensation group assisted
in determining the factors for the Black-Scholes value of the options, including adjustments to take into account the likelihood
of employee terminations before vesting and the likelihood that the options would actually be exercised.
Assisted clients to obtain determination letters for qualified 401(k) and pension plans from the IRS under GUST.
Assisted clients with ERISA prohibited transaction issues that arise in funds having pension plan investors. This assistance
included suggestions as to the structure and design of such funds, as well as disclosure materials and financing and agreement
terms that complied with ERISA and protected our clients’ interests. The funds included real estate operating companies (REOCs)
and venture capital operating companies (VCOCs), and other funds subject to ERISA.
Represented clients in various ERISA litigation matters, including benefit claims and fiduciary breach, and interpleader actions.
Represented clients before the Department of Labor in audits of employee benefit plans.
Advised clients as to the current state of ERISA law post-Enron on issues related to the acquisition and holding by employee
benefit plans, such as 401(k) plans, of employer securities.
Assisted clients on the employee benefits and ERISA aspects of the due diligence, drafting and negotiation of various merger
and acquisition agreements, including an evaluation of the scope and magnitude of potential ERISA liabilities.
Assisted clients in the design and administration of non-qualified deferred compensation plans designed to avoid current recognition
of income, including an evaluation of the effect of proposed federal tax legislation relating to such plans.
Assisted a major financial institution apply to the Department of Labor for an individual ERISA prohibited transaction exemption.
Obtained private letter ruling from the Internal Revenue Service that deferrals to a client’s governmental plan did not cause
current inclusion in the income of employees.
