How do I interpret the post-termination exercise language in my contract?
Editor’s note: A version of this question originally appeared on Reddit.
I’m planning to leave my job and I want to exercise my stock options. It was a terrible place to work, but I still believe in the company and I think they’ll be successful in the future.
When I reviewed my paperwork, one section jumped out at me:
“Following the date of termination of Optionee’s Continuous Service Status for any reason (the ‘Termination Date’), Optionee may exercise this Option only as set forth in the Notice and this Section 5. If Optionee does not exercise this Option within the Termination Period set forth in the Notice or the termination periods set forth below, this Option shall terminate in its entirety.
“In no event may any Option be exercised after the Expiration Date of this Option as set forth in the Notice. For the avoidance of doubt and for purposes of this Option only, termination of Continuous Service Status and the Termination Date will be deemed to occur as of the date Optionee is no longer actively providing services as an Employee or Consultant (except, in certain circumstances, to the extent Optionee is on a Company-approved leave of absence and subject to any Company policy or Applicable Laws regarding such leaves) and will not be extended by any notice period or “garden leave” that may be required contractually or under Applicable Laws, unless otherwise determined by the Company in its sole discretion.”
Does this mean I’d have to turn over my stock options to the company when I resign?
- Anonymous
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Dear Anonymous,
This section of your employment contract describes your company’s post-termination stock options exercise window.
Most startups give employees 90 days to purchase their stock options after leaving the company. If they fail to purchase their stock options inside that window, the options get taken away and put back into the equity pool.
Every year, startup employees forfeit millions of dollars worth of vested and unvested stock options. If you want to purchase your shares (i.e. exercise your stock options), double- and triple-check your stock options paperwork to understand:
- How much will it cost to exercise my stock options?
- What taxes can I expect to pay upon exercise?
- How much time does my company give its employees to exercise their stock options?
Some companies have voluntarily extended their post-termination stock options exercise window out to as much as 10 years. Most still give employees just 90 days.
At first glance — and check with a lawyer for absolute clarity — the contract’s language seems to be fairly standard. Good luck on your next career move!
- Vieje Piauwasdy, Senior Director of Equity Strategy, Secfi
Do you have a question about your stock options? Email us at ask@secfi.com