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Subject:   quick question about stock options
From:   Jordan

Hi there, I have a really quick question regarding stock options.

I was let go by my company and for some reason I thought I had 90 days to exercise my options after termination. It's now been 50 days and I was just informed that I only had 30 days according to our stock option agreement (which no one has a copy of). So I've effectively lost my options, and we're talking about a lot of options. 750,000, or 2.5% of the company to be exact. What legal recourse do I have to exercise them?

Any help is most appreciated.

Cheers,

Jordan

Answer

Date:   Wed, 16 Sep 2002

Hello Jordan,

I'm not an attorney, so I can't answer your question. If you call me, I'll refer you to an attorney who may be able to help.

I am printing your question to remind readers that the Internal Revenue Code provides the maximum guidelines for plan provisions, but the plan document can provide more restrictive requirements.

According to §422(a)(2), in order to qualify as an ISO, the taxpayer must have been an employee of the company granting the option or a parent or subsidiary of the company during the period beginning on the date the option was granted and ending on the date 3 months before the exercise date.

Some companies are more liberal and allow the employee to continue holding the options, which are converted to non-qualified stock options three months after termination. Some companies, like yours, have a shorter time frame for expiration.

The company should have provided a copy of the stock option plan to you when the option was granted. If you didn't receive a copy or a summary of the plan provisions, you may have a basis for a claim.

Good luck!

Mike Gray

For more information about incentive stock options, request our free report, Incentive Stock Options - Executive Tax and Financial Planning Strategies.

IRS Circular 230 Disclosure: As required by U.S. Treasury Regulations, you are hereby advised that any written tax advice contained in this answer was not written or intended to be used (and cannot be used) by any taxpayer for the purpose of avoiding penalties that may be imposed under the U.S. Internal Revenue Code.