Accelerated Vesting of Employee Stock Options: Principles and Strategies

Abstract

Many company stock option plans contain important provisions that provide for accelerated vesting of options upon a change of control of the company. How do these provisions work? What different types of provisions can an option plan have relating to accelerated vesting? What are the implications of these provisions? Who benefits from these provisions, and who can suffer from them? How can these terms be important to a company, its employees, its shareholders and its potential acquirers? What is the impact of these provisions if one company proposes purchasing another? What strategies are used by parties to a corporate merger to react to the existence of these provisions? Answers to these questions are found in this article.