A double trigger change in control agreement (DTCICA) is a type of employment contract that provides key executives and employees with additional job security in the event of a merger or acquisition. In this article, we will take a closer look at what a DTCICA entails, why it is important for both employers and employees, and how it can be used effectively.
What is a Double Trigger Change in Control Agreement?
A double trigger change in control agreement is a legal agreement between a company and its executive team that provides certain financial and legal protections in the event of a merger or acquisition. It is called a “double trigger” because it requires two triggers in order for the provisions of the agreement to be activated. The first trigger is typically a change in control of the company, such as a merger or acquisition. The second trigger is the termination of employment or a significant change in job responsibilities for the executive or employee covered by the agreement.
Why is a Double Trigger Change in Control Agreement Important?
For employers, a DTCICA can be an effective tool for retaining key employees during times of uncertainty. In a merger or acquisition, employees may be uncertain about their job security or the future of the company. By offering a DTCICA, employers can provide additional job security and incentivize key executives and employees to stay with the company through the transition.
For employees, a DTCICA can provide financial and legal protections in the event of a change in control. This can include severance pay, stock options, and other benefits that can help ease the transition to a new employer.
How to Use a Double Trigger Change in Control Agreement Effectively
When using a DTCICA, it is important to be clear about the terms of the agreement and what triggers will activate the provisions. This can include defining what constitutes a change in control and what types of changes in job responsibilities will trigger the second trigger.
It is also important to be mindful of the potential risks and costs associated with a DTCICA. For employers, offering additional benefits to key executives and employees can be expensive and may be seen as unfair by other employees. For employees, a DTCICA may be a sign of limited job security and may not provide the level of protection that is needed.
Ultimately, a double trigger change in control agreement can be an effective tool for both employers and employees during times of uncertainty. By providing additional financial and legal protections, it can help to retain key executives and employees and ensure a smooth transition during a change in control.
