All About Vesting, Lock-Ups, etc. 18 Multiple grants vesting over the same term (four years) provides overlapping of vesting. Each grant would have a different strike price based on the stock's performance, so options issued one year may be worth more than options granted another year. Caution You need to keep track of options, their grant price, vesting, and term limit or you could let valuable options expire. If you are fortunate enough to work for a company that regularly grants employee stock options, you will need a system for keeping track of the vesting schedules. It is hoped your plan administrator will provide you with reports to help you keep all this information straight, but if not, try this work sheet. You can do this on paper or convert it to a spreadsheets program like Microsoft Excel or one of the others on the market for personal computers. I am using the same example as above for this work sheet. Grant Year 1999 2000 2001 Strike Price 2000 $24 $20 $26 $25 2001 $25 $25 Vesting Year 2002 $25 $25 $25 2003 $25 $25 $25 $25 $25 $25 2004 2005 An options grant on January 1, 1999, would be partially vested on January 1, 2000. If your employer regularly uses a different date, then you can adjust the work sheet. For example, if the grant date is always June 1, then the first vesting period concludes on May 31 of the next year and you would be partially vested (25 percent) on June 1 of that year. A spreadsheet is a columnar pad of paper or computer program that lets you list items in one column and variables in another. This gives you information about what will happen in certain circumstances. As you can see, each grant has its own strike price, which is probably typical of employee stock options for publicly traded companies. You can use the work sheet to see how many vested options you are entitled to and at what strike price in any year. For example, the year is 2003 and you want to exercise some of your options. The current market price of the stock is $25 per share. Using the work sheet, you can quickly see that you are vested in ... · 100 options with a strike price of $24 per share · 75 options with a strike price of $20 per share · 50 options with a strike price of $26 per share Based on this information, you decide that the difference or spread of the option with strike price of $26 is negative, so you don't want to exercise those options. You should hold on to them because it is possible they may become profitable in the future. You have until the end of the option term to decide, unless you retire or leave the company. The options with a strike price of $24 per share are barely profitable, so you don't want to exercise those. However, the options with a strike price of $20 per share are profitable by $6 per share, so you exercise those. This simple exercise does not take into account whether the options were nonqualified or incentive. It also does not consider the tax consequences. I discuss these concerns in more detail in later chapters. Plain English