I worked for a startup and as an employee, was “granted” 34,000 “Options” and “vested” in 8,000 “Options (ISO)”. The company has not gone public yet but likely will in the next 3-5 years. I just left the company and the exit paperwork says “Upon termination, you have three months to exercise your Options before they expire.” I have no idea what this means. What happens if I exercise them? What happens if I don’t? What does it even mean to exercise them? Please help.
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Assuming they are “call” options (which they would be, since you got them from working for the company), to “exercise” them means to purchase shares of the company’s stock at the “strike price”.
If the strike price is lower than what you think a share of the company’s stock is worth, then you might want to exercise them. You could immediately sell the shares if you can find a buyer. Or if you think the company is likely to succeed and go public, you could hold the stock until then.
If you don’t have access to funds that would be needed to purchase the company’s stock at the strike price, you might be able to sell the options to someone who wants to invest in the company. But you would need to do so before the 3 month period is over, because the options can’t be used after that point.
“Vested” usually means that you’re entitled to them at a specific point in time. As for the options that weren’t vested immediately upon your hiring, they may or may not have become vested after you were hired. This typically depends on how long you worked for the company.
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