The Advisors' Blog

This Morgan Lewis blog walks through the key decision points deal teams need to address when determining how to treat performance-vesting awards in connection with corporate transactions — after nailing down what is permitted under the terms of equity plans, award agreements and employment arrangements. To the extent awardees may be able to argue that the desired treatment of awards may not be permitted, the blog recommends the parties consider requiring consent from each participant.

It also has this good reminder to buyers to consider what constitutes “good reason” upfront for any awards with double-trigger vesting:

The awards may be subject to “double-trigger” vesting terms, pursuant to which vesting would accelerate upon a postclosing termination of the awardee’s services by the company without “cause” or by the awardee for “good reason.” If such double-trigger protection is to remain in effect postclosing, the buyer should assess whether the “good reason” concept is appropriately tailored and should revise any overbroad “good reason” definitions accordingly. For example, the buyer would not want an awardee to be able to resign for “good reason” and receive accelerated vesting solely as a result of the transaction and without any corresponding diminution in role or compensation.

– Meredith Ervine