equity, stock-optionsThis is a question spring boarding off my initial question on options vesting. I’ve received my offer, and in it they provide a clause on Stock Options.
To me, it appears that they leave themselves an “out” by saying “Subject to the approval of the Board of Directors”. I’m accepting a lower base salary for options, so shouldn’t the language be more concrete than this, such as “Here are your 32k options. Sign below”?
Subject to the approval of the Board of Directors, you may be eligible to receive an option to purchase 32k common shares of Company X’s equity (“Option”). The vesting schedule and all terms, conditions, and limitations of the Option will be set forth in option grant notice, the Company’s standard Stock Option Agreement and Stock Option Plan.
Moreover, aren’t the following questions typically covered in an agreement?
Should I ask the CEO to include all these things in the clause, including more concrete language about the options ownership?
Also, if it’s missing any other language please let me know.
Leaving the company: Do I need to exercise my options if I leave? Or can I leave them invested with the company if I think the company will continue to grow?
You need to read your agreement.
Normally in the US stock option grants usually expire 10 years after the grant date. So you need to exercise the options before this date or the grant expires.
Additionally (in the US) there are two types of stock options.
You have until the grant expires to decide whether you want exercise them. Note there are taxable implications on the timing of between when you exercise your options and when you sell your stock (consult the appropriate people about these taxes).
Pre-exit options exercising: Will I get a cash payout worth my vested % if I leave and the company before the company exits?
No. Your options are only a right to buy shares at a specific price. If the grant expires so does your right to buy the shares at that price.
Even if you buy the shares you may not be able to sell the shares (i.e. get your money back). So your money is tied up until you find somebody (some company) willing to buy the shares from you.
Note: Until there is an IPO (or the company is bought) there is no marketplace to sell shares in the company. So it has to be a private sale and you can only get what somebody is willing to pay for them.
Early IPO/exit Accelerated Options Vesting: What typically happens if I’m in for a year, 25% vested, and the company exits. Do my options fully vest to 100% of .89% automatically?
Read your agreement.
Unlikely. Accelerated vesting is usually only provided to founders (or very important people).
Should I ask the CEO to include all these things in the clause, including more concrete language about the options ownership?
The clause you are referring to is pretty standard. BUT there will be another document detailing the exact details of your share options.
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