Stock Options help
April 13, 2006 6:45 PM   Subscribe

I quit my job at a company after 2.5 years. I have (had) 5000 stock options at the time. Of that a certain percentage had vested (more than half). That company was purchased last week. According to the agreement I have and the "plan", I It clearly states that. I quit that job and was not fired. The term of the options are 10 years. I was told by the controller of the company I could not exercise my options.

When I asked for an explanation (show the language in the agreement), I was told the "matter is closed". At that point I simply said that I would notify the board of my intent to exercise, and have my lawyer review the documents. After that, the cfo contacted me and tried to state that the shares were not vested AND exercisable. He wasn't able to explain to me what that means. He then back tracked and told me he would call me back tomorrow after speaking with their lawyers. This was a private company bought by a public company. Now, I know some people got rich. I also know for a fact some people got checks and everyone was told in a meeting you had to be an employee on such and such date, etc. However, I've read this agreement and plan a hundred times. It simply states you have 30 days (unless you croak or become disabled or whatever). What should I be doing here? Should I go to a lawyer? Should I just call a broker and have them file for me? I've never done this but I have only until the end of the month to do something. Also, if this is a public company now is there a way for me to look up the total shares and prices and all that? I know the ticker symbol of the merged company.have 30 days after I leave the company to exercise my options.
posted by arh07 to Law & Government (17 answers total) 1 user marked this as a favorite
1. use more inside
2. seek professional council
posted by b1tr0t at 6:51 PM on April 13, 2006

also, the council should be legal - a broker can't do anything to help you.

Yahoo, MSN, and Google all have finance pages that might help you understand the public corp, but your issue is with the private company. It sounds like your company is pulling the same trick Google tried to pull - "forgetting" to disclose some stock options held by less important people.
posted by b1tr0t at 6:57 PM on April 13, 2006

Thanks for the input. b1tr0t - can you show me a link for the google story?
posted by arh07 at 6:59 PM on April 13, 2006

Go get a lawyer right now. They're trying to screw you.
posted by Malor at 7:04 PM on April 13, 2006

[moved more to inside]
posted by jessamyn (staff) at 7:08 PM on April 13, 2006

There's no enforcement in private stock options except for a lawsuit. No regulator, nothing. Broker can't do anything for you. So, you have to decide right now whether it's worth paying a lawyer over this. A lawyer will happily take your money but there's no guarantee of success.

Send the company a registered, notarized letter requesting that they assist you in executing your stock options. Keep a copy of the letter, the receipt from the U.S. Postal Service, and so on. So you can prove that you acted in time. Write down the details of any phone calls you've had with them, right now while the details are fresh.

It may be that if you aggressively pursue it they'll pay you off to make you go away. If not, you'll be faced with an expensive legal battle.
posted by jellicle at 7:25 PM on April 13, 2006

your question got mangled. i think you are saying that you had 30 days after quitting to exercise and it is within the 30-day window right now.

if so, they are trying to screw you. do what jellicle says, and then get a lawyer.

if not, you didnt exercise in time according to the contract, and they are correct; your options were canceled.
posted by joeblough at 1:24 AM on April 14, 2006

Most options are expire upon termination of the employee. Your non-vested options are gone. Often, exercise of vested options is allowed during a short period of several weeks to several months after termination if the employee left voluntarily and often options retain their full period if the employee retires. Often. What is in your plan? You need to lawyered up, now, and you need to find the details of the plan, now. Don't let the time period, if it exists, toll.
posted by caddis at 4:48 AM on April 14, 2006

You need a lawyer, now, especially since there's a 30-day window. If nothing else, it will give the company someone else to call who will intimidate them a lot more than you will.

(I am a lawyer, but I am probably not licensed in your state, and I do not represent you. Consult competent counsel.)
posted by raf at 5:31 AM on April 14, 2006

Don't listen to jellicle--see an attorney now. He or she will be the only person who can lay out the options for you and the costs. Ditto raf's disclaimer.
posted by Ironmouth at 6:51 AM on April 14, 2006

i am within the 30 days. I have called some lawyers. The cfo has told me today the reason is that they are only exercisable during a "liquidity event" and since i was not an employee when that happens, i don't get the options. However the event occurred during my 30 day window so I still want to follow through on this.
posted by arh07 at 9:56 AM on April 14, 2006

Should I go to a lawyer?


Also, if this is a public company now is there a way for me to look up the total shares and prices and all that?

Yes, but you need to know the share price ratio. For example, if they bought X shares of your company for 1 share of the public company, then you'd divide their share price by X, and then multiply by the number of options.

If you know someone who got their options, then you should be able to find out how much they got and what each individual share was sold for.
posted by Paris Hilton at 10:07 AM on April 14, 2006

(Disclaimer: IAAL, but this is not legal advice and I am not your lawyer.)

If they won't back down, get a lawyer. And get one before the thirty days are up.

You're right, it sounds like you've got a pretty solid argument. But (a) the devil is in the details, and oftentimes they can raise more than one clever argument as to why you shouldn't get paid, and you need a lawyer to tell them where to shove it (b) whether your argument is good or bad is irrelevant as long as you don't act on it. The only way for a good argument to become legally binding is by going to court (or by threatening to go to court, and negotiating a settlement). Do it now.
posted by kingjoeshmoe at 10:08 AM on April 14, 2006

That was the math I needed to know. Thanks Paris baby!
posted by arh07 at 10:15 AM on April 14, 2006

i suppose an option contract can look like however the granting company decides to write it. that being said, i've never heard of this "liquidity event" idea. before our startup was bought, most of us exercised our options under rule 83(b), which is a tax dodge that lets you exercise when the company doesnt have much value, and thus avoid a huge tax bill that's usually created when you exercise.

now it may have been that the company had to do something to allow the 83(b) exercise, and that consituted such a "liquidity event"

i cant imagine that they are worried about the dilution that your shares represent. did they have a falling out with one of the founders, or someone that might have millions of options who is in the same situation you are in? they could be trying to avoid setting a precedent so that other person can't use it as an argument to be allowed to exercise their shares.
posted by joeblough at 1:55 PM on April 14, 2006

I am not aware of any kind of falling out. I am not aware of anyone quitting around the time I did. Anyway, the latest is I gave the documents to a lawyer this afternoon. She told me she would be able to tell if I have a case or not by simply reading. I read them both a hundred times. I can't find anything that even remotely says "you can only exercise if you are an employee at the time of the liquidity event". It simply says you can exercise for 30 days after you leave if you were not fired.
posted by arh07 at 2:17 PM on April 14, 2006

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