What it is:
Accelerated vesting occurs when a stock option becomes exercisable earlier than originally scheduled.
How it works (Example):
For example, let's assume that John Doe receives options to buy 2,000 shares of Company XYZ, his employer, for $10 a share. He receives the options as part of his compensation package.
Normally, his shares vest over a five-year period, meaning they do not become exercisable for five years. However, Company ABC comes along and buys a 51% stake in Company XYZ. Because this constitutes a change in control, John Doe's options automatically vest even though the five-year period has not elapsed. John exercises his options at $10 a share, sells the shares for $20 a share and walks away with a tidy profit.