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Is “Full Acceleration” of Equity Vesting Common in Executive Employment Agreements?

full acceleration equity

In this interview with Jennifer Rubin, Member, Employment, Labor & Benefits Practice at Mintz Levin, we discuss the full acceleration of equity vesting in executive employment agreements and what is common today.

Jen focuses on C-suite executive compensation practices, and on meeting the increasingly complex employment needs of executives of public and private corporations.  When she isn’t negotiating employment, equity vesting and severance arrangements, Jen leverages her twenty-five years of experience as a trial lawyer to help clients craft business solutions to legal problems.  Jen, who has an AV Preeminent ranking from Martindale-Hubbell, which publishes a highly respected Law Directory, that provides background information on United States lawyers and law firms.

She is also a member of the Board of Directors of Big Brothers Big Sisters of San Diego County and is a faculty member and advisor to The Honor Foundation, a non-profit organization that assists Navy Seals and other armed services special operators transition from military service to the private sector.  Jen is frequently quoted in the Wall Street Journal and other publications.

Jennifer:   I think the most common thing that you see is a full acceleration with change of control. There are different issues with private companies and public companies, obviously related to marketability. With a private company, you can’t necessarily sell the stock on the open market.

There are also issues associated with the 280G that I just mentioned, which is the parachute tax. That is what happens when the individual parachutes out and receives all of this compensation that might trigger those tax provisions.

With a private company, there are certain ways that might be able to be dealt with that addresses the tax situation, that is not available in a public company situation. If I was representing an executive, I’d like to see full acceleration. That’s what I would argue for.

Patrick:     But it would be dual trigger.

Jennifer:   Yes, it would be dual trigger. Again, I can’t remember the last time I’ve seen a single trigger. You want to negotiate for that acceleration and connection with the change in control because that’s the whole point. You foster this organization. You take it to that point. The new company comes in. They’re either buying all the assets or the stock. That’s the point of you staying and remaining incentivized to stay. It’s so that you get the benefit at the end. The way to get the benefit is through the equity.

This is Patrick Henry, CEO of QuestFusion, with The Real Deal…What Matters.