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Subject:   NQSO question
Date:   Tue, 29 May 2001
From:   Joel

Hello Mike,

I have a question about NQSOs. Back in March, the company I worked for granted me a few shares of NQSOs as a method of compensation for underwater strike prices of my original ISOs. I have since been laid off from the company and none of my options have vested. In my severence letter, it stated that any unvested stock options would not be retained, but can they retract the NQSOs? Since those could be issued to a non-employee, it seems that they could still be completely valid even though I haven't hit the vesting date yet. Can you help explain this to me?
Thanks.

--- Joel

Answer

Date:   Mon 9 Jul 2001

Hello Joel,

I’m not sure why you are confused.

Different non-qualified stock options can have different terms. Not all of them have a vesting schedule, but yours did.

You didn’t fulfill the service requirements under your vesting schedule, so your options lapsed.

Read your option agreement carefully for any exceptions to the vesting requirements in the event of early termination.

Good luck!

Mike Gray

For more information about non-qualified stock options, request our free report, Non-Qualified 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.