In a blog post series published on our WilmerHale Launch site, Partners Ciara Baker and Kim Wethly take a close look at startup stock options. Part II explores stock option program “enhancements” by considering early exercisable stock options.
Excerpt: “An early exercisable option is an option that allows the option holder to exercise the option before it is vested. Unlike a traditional option, the holder of an early exercisable option does not have to earn the right to exercise an early exercisable option. Rather, the option holder can exercise the option at any time. However, if the option holder exercises the option before it is vested, he or she must then earn the right to keep the shares of stock received upon exercise of the unvested portion of the award. Put another way, when the option holder early exercises an option, the option holder does not receive fully vested shares of stock (as the option holder would upon exercise of a vested option) but instead receives restricted stock that is generally subject to the same vesting schedule that applied to the unvested option. If the holder of the restricted stock leaves the company before those shares are fully vested, the company generally has the right to repurchase any unvested shares at the same price the holder paid for them.”
