Drafting change in control agreements manually requires hours of careful attention to complex definitions, severance calculations, equity acceleration terms, and Section 280G tax implications. Attorneys must balance executive protection with company interests while ensuring compliance with securities laws and tax regulations, often requiring multiple revisions and stakeholder reviews.
Change in control agreements require balancing complex tax regulations (280G, 409A), corporate governance standards, and executive retention needs. Attorneys spend 8+ hours navigating definitions, severance multiples, equity acceleration, and excise tax provisions while ensuring consistency with existing compensation arrangements and compliance with evolving institutional investor guidelines.
CaseMark analyzes your employment agreements, equity plans, and compensation policies to generate comprehensive change in control agreements with precise definitions, tax-compliant severance structures, and appropriate double-trigger protections. The AI ensures consistency across executives while customizing terms based on role, seniority, and company-specific requirements.
This workflow is applicable across multiple practice areas and use cases
Change in control agreements are essential M&A transaction documents that address executive retention and severance in connection with corporate acquisitions and mergers.
M&A attorneys routinely draft these agreements as part of transaction documentation to secure executive cooperation and manage employment-related deal risks, making this workflow directly applicable to their core practice.
Corporate governance attorneys advise boards and compensation committees on executive compensation arrangements, including change in control provisions that require board approval and proxy disclosure.
These agreements involve significant governance considerations including board fiduciary duties, shareholder disclosure requirements, and compensation committee oversight, making them central to corporate governance practice.
Private equity and VC attorneys structure change in control agreements for portfolio company executives to align incentives during exit transactions and manage retention during ownership transitions.
PE/VC transactions frequently trigger change in control provisions, and these attorneys need to draft agreements that balance investor exit objectives with executive retention and motivation during liquidity events.
Securities attorneys must ensure change in control agreements comply with SEC disclosure requirements in proxy statements and registration statements, particularly regarding executive compensation and golden parachute arrangements.
The workflow's built-in compliance with securities law disclosure requirements and Section 280G calculations directly addresses regulatory obligations that securities practitioners must navigate when advising public companies.
Single trigger agreements pay benefits immediately upon a change in control, regardless of whether the executive remains employed. Double trigger agreements require both a change in control and a qualifying termination (termination without cause or resignation for good reason) before benefits are paid. Double trigger structures are now the market standard because they avoid paying executives who remain employed post-transaction and are favored by institutional investors and proxy advisory firms.
Severance multiples typically range from 1.0x to 3.0x the sum of base salary plus target bonus, depending on the executive's level and role. CEOs commonly receive 2.5x to 3.0x, other C-suite executives receive 1.5x to 2.0x, and senior vice presidents receive 1.0x to 1.5x. The multiple should reflect the executive's seniority, difficulty of replacement, and competitive market practices while considering institutional investor guidelines that disfavor excessive multiples.
Section 280G disallows a company's tax deduction for 'excess parachute payments' that equal or exceed three times an executive's base amount (average five-year compensation). Section 4999 imposes a 20% excise tax on the executive receiving such payments. Modern agreements typically use a 'best net' cutback (reducing payments to 2.99x if that results in better after-tax proceeds) or a no-gross-up approach where the executive bears the excise tax. Full gross-up provisions, where the company pays the executive's excise tax, are now rare in newly negotiated agreements.
Good Reason should include material diminution in authority/duties/responsibilities, material reduction in base salary or target bonus, and relocation beyond 35-50 miles. Critically, the definition must include procedural requirements: the executive must provide written notice within 60-90 days of the condition arising, the company gets 30 days to cure, and the executive must terminate within 30-60 days if not cured. These procedures prevent executives from stockpiling grievances or claiming Good Reason for stale or cured conditions.
Best practice is double-trigger acceleration where unvested equity accelerates only upon a qualifying termination during the protection period (typically 12-24 months post-change in control). For performance-based awards, specify whether vesting occurs at target, maximum, or actual performance through the change in control date. Extend post-termination exercise periods for stock options to 12-24 months (rather than the standard 90 days) to accommodate trading restrictions and tax planning. Single-trigger acceleration is increasingly disfavored by institutional investors.