Can my company change their policy about early exercise of ISOs?
July 12, 2004
Subject: adding early exercise option to existing ISO plan
Date: Fri, 04 Jun 2004
Dear Mr. Gray:
I currently work for a pre-IPO company. I have received an initial grant of ISO stock options. The current plan does not include a clause allowing early exercise of unvested options.
Is it possible and/or legal for a company to add such a clause to its stock option plan retroactively for previously-granted options? Is there any precedent for this sort of addendum?
Date: Fri, 02 Jul 2004
I believe a change like this is permissible. Your company’s counsel should refer to Internal Revenue Code Section 424(h)(3)(C).
Remember that accelerating the ability to exercise ISOs can result in the $100,000 per year limit being exceeded, converting some of the ISOs to NQOs.