Meaning
Contractual provisions dictate the immediate vesting of restricted stock or options upon the occurrence of specific triggering events. While common in employment agreements, acceleration clauses often focus on protecting a founder against loss of control or job security during an acquisition. Double trigger versions require both a change in control and a termination without cause.
Such provisions ensure that the individual receives the value of their equity when the company is sold even if they do not remain with the new entity.
Trigger Event
Execution of these terms usually follows a predefined milestone such as a sale or merger. A single trigger acceleration clause activates as soon as the transaction closes, granting the beneficiary ownership of their remaining unvested shares instantly. This mechanism provides immediate liquidity.
Reciprocity Dynamic
The provision functions as a form of security for the talent provided. Founders grant their time and intellectual property in exchange for the promise that a liquidity event will not strip them of their earned stake. It protects the person from being fired right before a payout occurs.
Settlement Limit
Not all equity is subject to these rules. The clause specifies exactly which grants are eligible and what percentage of unvested stock becomes available. Some agreements cap the acceleration at fifty percent of the remaining balance.
These limits define the ceiling of the immediate payout.
