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Each enhanced language [GREEN] is intended for the user. Any language highlighted [YELLOW] is considered optional or conditional by the legal community. Talk to a lawyer before using this document. This document is not a substitute for legal advice or services. For more information, please see our terms of use. Imagine that you received a job offer from a new startup called Meetly. In your letter, they offer an annual salary of 100,000 $US and 100 stock options. The main drawback of stock options plans for the company is the possible dilution of other shareholders` equity when employees exercise stock options. For employees, the main drawback of stock options in a private company – compared to cash bonuses or higher pay – is the lack of liquidity.

As long as the company does not create or is acquired on the public market of its shares, the options will not live up to the monetary advantage. And if the company doesn`t grow and its shares don`t become more valuable, the options could ultimately prove worthless. 1. Exercise of the option. Effective from today, [optionee] decision to exercise the option option, to acquire shares of the common share (the “shares”) of a Delaware company (the “Company”) in accordance with the Equity Incentive Plan that has been amended from time to time (the “Plan”) and the option agreement of the date [option date). The wholesale terms that are used in the absence of a definition have the meaning indicated in the option agreement. Once these factors have been taken into account, you are ready to put in place a stock options plan that matches your goals. This will increase employee motivation and satisfaction through a higher compensation model that will provide key employees with the benefits of ownership.

This article is part 1 of our series on the basics of start-up stock options. Here`s Part 2 and Part 3. Follow us on Twitter @cartainc for more educational content. 2.2. Appointment of option. If this option is called an incentive option in the notice of award, it should be considered a stock incentive option in accordance with section 422 of the code; however, if the fair aggregate market value of the common stock with respect to incentive options (in the sense of the code, section 422, but not including the code, section 422 (d) ], including the option, optionee is exercised for the first time in a calendar year (as part of the plan and all other incentive stock options plans of the company (or a “parent company” or “subsidiary” within the meaning of Sections 424 (e) or 4 24 (f)) is more than $100,000, these options are considered unqualified in section 422 code; but as unqualified stock options, as long as this is required in section 422 of the code.