Biotech Values

[biomaven0]

What I do commonly see are provisions for automatic vesting of exec options on any merger or change of control. There is an accounting rule that allows you to ignore that particular provision when figuring expensing. (Such provisions are bad for shareholders because they basically funnel some of the surplus from a merger to the execs instead of the shareholders).

You also see a lot of options that allow for automatic vest if the employee is beyond retirement age when they leave. The service period for those options is from grant date to retirement eligibility date - so sometimes those have to be fully expensed at grant date. (In theory a retirement eligible employee could leave the next day after the grant and have them vested, so there is no actual legal service requirement, so they are viewed as "already earned" as of grant date).

In the vast majority of cases when a CEO leaves you will see negotiations about acceleration of options. So any acceleration clause (should there in fact be one) virtually never gets invoked. Part of what happens is that even if it is in fact a termination, the departure is almost always recast as a mutual decision.

Peter