If a key employee has a vesting acceleration right upon the company’s sale, then the buyer is at risk of losing the talent that built a successful organization. On the other hand, vesting acceleration clauses can lead to a lower acquisition price to offset buyout costs. The borrower doesn’t have to pay the interest that would have accrued over the life of the loan, however. Both answers have the same explanation. This is because they largely want to ensure continuity of the talent and operations that made the company prosperous in the first place. Just one larger insight: it probably doesn't help, or matter too much, to have single trigger. If you get acquired, this is going to … Double-trigger acceleration has become very popular with early stage companies and aims to align the interests of the employees, the investors and potential acquirers by (i) providing a safety net for key employees, some of whom may be removed in the consolidation during post-closing integration – CFOs and GCs are particularly susceptible, (ii) reducing dilution from automatic acceleration, and (iii) easing the qualms of the acquirer by preserving the requirement of ongoing service to the company in order to vest. Y Combinator "Safe" Financing Documents (Singapore) Generator. You should do double triggers for all - change in control and your job disappears or changes a lot ... (for example) to work into some ... if we assume that an acceleration clause is some more skin in the game for senior management, would it then make sense to extend the vesting period to 5 years vs. 4 years. A double trigger acceleration clause empowers the new entity to fine-tune their selection by enabling them to terminate without cause those key employees they don’t need, while maintaining business continuity with core senior staff from the former company. Interest payments are determined by the interest rateInterest RateAn interest rate refers to the amount charged by a lender to a borrower for any form of debt given, generally expressed as a percentage of the principal.that a lender charges a borrower. This is not the norm, even for founders and key executives, and very unusual for rank-and-file startup employees. Acquirers may also be concerned about the prospect of handing over life-changing amounts of cash to executives and then trying to formulate retention packages that are sufficient to actually get them to remain in their jobs through the sometimes difficult period of post-acquisition integration, a time when these employees may have new bosses and uncomfortable new levels of corporate bureaucracy. For example, consider an auction situation. Double trigger acceleration – Two events are required to trigger the acceleration of vesting, resulting the equity owner to … Thank you for reaching out to us. The authors’ recommendations: We do not favor a single-trigger acceleration of options at a change in control. Double trigger: This type of acceleration occurs when a company is acquired at the same time your employment is terminated. Double Trigger Acceleration. So, if you had two of four years vested, and you had a one-year single trigger acceleration clause, you’d have three years vested at the end of the acquisition. Double trigger acceleration – Two events are required to trigger the acceleration of vesting, resulting the equity owner to receive the full or partial value of the stock. The applicant relied heavily on the unanimous decision of Chatrooghoon v Desai 1951 (4) SA 122 (N). This approach is commonly referred to as "double trigger" acceleration upon an acquisition. Double Trigger Acceleration. Single Trigger Acceleration Acceleration of vesting based on a single, specified, event, such as an acquisition or change of control. interest as a basis to trigger the acceleration clause and demanded repayment of the full loan amount, in the sum of R7 665 040.14. Standard vesting schedule and acceleration triggers The standard practice for equity vesting seems to be a linear 4-year vest, with a 1-year cliff, and a double-trigger acceleration clause. What is the difference between single trigger and double trigger acceleration of vesting in connection with a merger, acquisition or othe…, Your email address will not be published. COOLEY® and the COOLEY LLP® logo are registered U.S. service marks of Cooley LLP. While in spirit, yes, everyone should be swinging for the same fence - having everyone participate in acceleration makes it significantly less attractive to Founder vesting terms customarily provide for: 1. Single Trigger (Reward). You can justify 100% double trigger acceleration by arguing that, “The aim of vesting is to make me stick around and create value — not to put me in a situation where I am deprived of the opportunity to vest because I am terminated for reasons beyond my control or I resign because the environment is intolerable. It’s called Double Trigger Acceleration because vesting occurs immediately (faster than the original schedule) when two triggers have occurred - first, the acquisition and, second, the termination. If you’d like assistance structuring your vesting acceleration clause by vetted startup attorneys, I invite you to take a look at LawTrades. receiving accelerated vesting of that shareholder’s shares. Acceleration Clause Example A borrower takes a home loan having tenure of ten years and unfortunately fails to honor payment in the fifth year. Single trigger acceleration does not reduce the length of your vesting period. If, however, the executive is terminated by the company’s new owners, without cause, then the acceleration clause is triggered. The reason it is called a “Double Trigger” is because there are two things that must occur before the accelerated vesting occurs. Single Trigger Acceleration Acceleration of vesting based on a single, specified, event, such as an acquisition or change of control. Some founders and key executives negotiate into their equity arrangements that they will be entitled to some form of acceleration of the vesting on their equity upon the occurrence of a triggering event. Typically, the qualifying termination means termination of employment by the company without “cause,” but can also include resignation by the employee for “good reason” (e.g. Single trigger acceleration is unpopular with investors who generally want to position the company for acquisition. Multiple Trigger Insurance Contracts — traditional insurance contracts have one trigger: ... For example, a multiple trigger (also known as a dual trigger) program could cover property loss due to fire, windstorm, etc., and a reduction in quarterly earnings that results from … Required over fixed time intervals ( usually every month ) with a,... 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