How these agreements usually work
A change in control agreement typically promises severance, accelerated vesting of equity, or both if the company is acquired. Single-trigger provisions pay on the transaction itself, while double-trigger provisions require both a change in control and a qualifying termination or resignation for good reason. The definitions of change in control and of good reason often decide whether anything is owed. Many agreements also condition payment on signing a release and honoring restrictive covenants. Equity plans and award agreements often contain their own change in control terms, and they do not always line up with the executive's separate agreement.
Tax rules that shape the numbers
Federal golden parachute rules can impose an excise tax on the executive and deny the company a deduction when payments tied to a change in control exceed a threshold based on past compensation. Agreements handle this differently: some cut payments back, some provide gross-ups, and some pay whichever version leaves the executive ahead after tax. Deferred compensation rules also govern when payments can be made, and a poorly drafted payment schedule can create penalties for the executive. Gather the agreement, equity award documents, any employment agreement, and compensation history for recent years.
Reviewing before a deal or a signature
For executives, we review what triggers payment, how equity is treated, what the tax exposure looks like, and what the release and covenants would require. For companies, we review whether existing agreements fit the planned transaction and what disclosures or approvals may be needed. Deal negotiations often move quickly, so understanding the terms in advance gives both sides room to plan. Our first meeting identifies the documents that control and the questions that matter most for your position.
