can stocks promised in an employment contract now be part of ESOP

[Guest winmac]

Any help appreciated --

Employees are promised company stock as part of compensation to be distributed/granted in 9/00, 9/01 & 9/02 this is before our ESOP was established - can that stock be part of the ESOP plan?

Thank for your help.

[RLL]

Hello winmac!

Your question is difficult to answer in light of your failure to provide more specifics as to your situation. The answer depends on what was promised to the employees.

If they were promised a direct issuance of stock, it would not be appropriate to provide it through an ESOP (which results in the deferral of receipt of the shares). In addition, the allocation of shares under an ESOP must be done pursuant to a definite allocation formula which does not discriminate in favor of highly compensated employees and generally may not "single out" individual employees for special treatment.

On the other hand, a vague "promise" to provide a group of employees with "stock" might allow for a contribution of shares to an ESOP.

What was promised? What are the employees expectations? Was the promise made to all employees or to a select group? Do the employees expect to "get rich quick" when the company does its IPO? What's going on there?