If an employee leaves in 2012 but has 90 days to exercise their vested ISO's, do we show their unvested shares as Cancelled as of 12/31/11, or do we have to wait until the termination date?
Cancellation of stock options
Answers
You have to wait until the termination date as they have the right to exercise
I would show the unvested shares as cancelled at 12/31/11, as there is no way that they could ever be exercised.
The vested shares should remain outstanding until they either expire or are exercised.
Jason is correct. Automated systems (our OptionTrax system included), would cancel (as a "forfeiture") any unvested shares on the termination date. Then those vested shares stay active for the 90 day termination period and if they are not exercised in that period are cancelled as an "expiration".
Be sure the cancelation is in line with their agreement's definition of the termination date.
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