What is Double-trigger Acceleration?

“”Double-trigger acceleration”” is a term commonly used in the context of employee stock options and equity compensation plans. It refers to a specific set of conditions that must be met for certain stock options or equity awards to vest (become exercisable) or to accelerate (vest more quickly) for an employee. Unlike “”single-trigger acceleration,”” which requires just one condition to be met, double-trigger acceleration necessitates the fulfillment of two distinct conditions.

The two common triggers in double-trigger acceleration are:

1. Change of Control (COC): This trigger occurs when a significant change takes place in the ownership or control of the company. This change is typically defined in the company’s equity compensation plan or agreement and can include events such as a merger, acquisition, or sale of the company.

2. Termination of Employment (TOE): This trigger occurs when an employee’s employment is terminated, either voluntarily (e.g., resignation) or involuntarily (e.g., termination without cause) under specific circumstances outlined in the equity compensation plan or agreement.

Double-trigger acceleration typically means that stock options or equity awards will vest or accelerate only if both of these conditions are met. For example, if an employee has stock options with double-trigger acceleration, they would typically need to experience a change of control event (e.g., the company being acquired) and have their employment terminated under specified conditions (e.g., being terminated without cause within a certain period after the change of control) to trigger the acceleration of their stock options.

The use of double-trigger acceleration is often seen as a way to align the interests of employees with the long-term success and stability of the company. It ensures that employees receive the benefits of their equity compensation in the event of a change in ownership or control that may result in their departure from the company.

Double-trigger acceleration terms can vary significantly from one company to another and are typically outlined in the company’s equity incentive plan documents and individual stock option or equity award agreements. It’s essential for employees to carefully review these documents to understand the specific conditions that apply to their equity awards and how double-trigger acceleration may impact them in the context of a change of control and termination of employment.