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Lesson 4. All About Vesting, Lock-Ups, etc. > The 30-Second Recap - Pg. 20

All About Vesting, Lock-Ups, etc. Plain English 20 Lockup period is a term used to describe a period of time during which you are not allowed to exercise the options even if you have met the vesting requirements or if there are no vesting requirements. For example, rank-and-file hourly workers may have one period, while managers may have another. As long as the lockup period is not discriminatory (men have one term, women another, for example), the company can structure the periods any way they want. The lockup period begins on the grant date of the options and is not connected to individual em- ployees. An employee of six months may have the same lockup period as an employee of six years. Tip Lockup periods, which prevent workers from exercising their options, can be different for different classes of employees and for different stock options grants. Companies use lockup periods for a variety of reasons. Some companies may use them as a cool- ing-off time to avoid everyone exercising his options immediately. As shown in Lesson 10, there may be certain legal or business reasons connected with the company's IPO for imposing a lockup period. The 30-Second Recap · Employee stock options must be vested before they can be exercised. · A vesting schedule spells out what percentage of options vest each year. · A company may issue multiple option grants over several years with different strike prices, vest- ing schedules, and terms.