Negotiating A Change In Control Agreement
Executive employment contracts often contain a change in control (CIC) agreement. This type of agreement provides information regarding senior-level stock options, executive compensation and severance pay in the event of a change in control of the company. At Sterling Employment Law, we represent C-level executives in Michigan and throughout the country with the drafting of employment agreements and CIC agreements to ensure that they receive enhanced protection if terminated.
Contact our experienced and successful team of lawyers for legal guidance on change in control agreements. Call us at 248-633-8916. We provide confidential legal counsel to executives and are available 24 hours a day.
Corporate Change Of Control
Changes in control often occur in corporate settings. A company is acquired by another firm, a stockholder might acquire a majority or substantial holding in the business, or the composition of the board of directors may change drastically.
When a change of control occurs, there are usually changes made in the top-level executive team. As a corporate officer, a CIC agreement is extremely important for your security. Should you be terminated due to a new owner, changes in the board of directors, a merger or an acquisition, you will want to protect your stock options, bonuses, retirement and benefits, in addition to being appropriately compensated for the loss of your high-level position.
Single-Trigger Vs. Double-Trigger CIC Agreements Explained
Understanding the “triggers” in your CIC agreement is critical. These triggers represent the specific milestones that must occur before you receive your CIC severance pay and executive compensation benefits. The type of trigger in your agreement directly impacts your financial protection and security during a corporate transition.
What Is A Single-Trigger CIC Agreement?
A single-trigger agreement pays your benefits immediately upon the consummation of the change in control, regardless of whether you keep your job. The moment the merger closes or the acquisition is finalized, you receive your payout. This structure strongly favors the executive by providing immediate financial protection. However, single-trigger agreements are becoming increasingly rare. Shareholders and acquiring companies view them as an unnecessary windfall since the executive receives full benefits even if they retain their position and compensation under the new ownership.
What Is A Double-Trigger CIC Agreement?
The double-trigger structure has become the current market standard in executive compensation law. This agreement requires two separate events before you receive benefits.
First, the change in control must occur. Second, you must experience a qualifying termination within a protected period, typically 12 to 24 months following the transaction. A qualifying termination usually means the company fires you without cause or you resign for good reason. This includes a significant reduction in your duties, compensation or relocation requirements.
Acquiring companies prefer double-trigger agreements because they retain top talent during the critical integration phase while still providing executives with meaningful protection against post-merger job loss.
Hybrid Trigger Approaches
Some agreements use a modified single-trigger or hybrid approach that blends elements of both structures. For example, your unvested equity might accelerate immediately upon the change in control (single trigger), while your cash severance requires both the transaction and a qualifying termination (double trigger). These hybrid arrangements attempt to balance executive protection with the acquiring company’s desire to maintain leadership continuity during the transition period.
It Is Important To Have Legal Representation During A Change In Control
If you are a senior or C-level executive, contact our law firm for assistance in drafting your employment agreement, including a change in control provision. Don’t wait until you have signed the agreement. Call Sterling Employment Law at 248-633-8916 or contact us online. Our offices are conveniently located in the heart of the Detroit metropolitan area.