Option scheme (based on American law) (two)

Four, the stock options granted to scale
The scale of stock option grants, essence is the amount of stock, the maximum power can be obtained after the shares shall be. Stock option has many advantages, but it is based on the existing shareholders equity dilution for the price. From the point of view of the company's existing shareholders, the degree of dilution of course is less, but too little is not sufficient to make it play an effective role in encouraging. Typically, there are three kinds of methods, can determine the stock option plan to scale.
Method, the maximum amount can be reserved for the stock options granted stock. This amount, the greatest degree of dilution on behalf of the existing shareholders can bear equity, in this limit, the company can according to the planning, rational allocation of this amount. This method is simple, but there are many defects: ① lines once identified, will be very difficult to get more from existing shareholders stock for option plan, therefore, expand the space of plans is limited; the company is difficult to reasonable distribution of this amount. Under normal circumstances the company will soon run out of this amount, so that the company can not continue to use stock options to attract new employees. Moreover, different times to enter the company's employees, stock option is usually obtained from the huge difference, not to explain the contribution to the company or its value angle, thus the lack of impartiality and convincing.
Method two, to grant stock options according to salary level. To take this approach, often based on the salary of the employee as the basis, the number of sets of employee stock options deserve. Using this method, can be a very good solution to the first method in attracting new employees and different times to enter the fairness of the defect between employees, companies in the stock option applied on a certain degree of flexibility, at the same time, the scale and development company awarded with synchronous expansion. However, this method is not applicable to those of the stock option as salary management system is the most important part of the company, is not suited to the pursuit of the IPO of the company.
Methods three, determine the options granted scale based on enterprise performance. The company will set a sales target, if the employee has reached or exceeded the target, then the company in accordance with the corresponding proportion of employee stock option plans to grant. This method is more close to the stock option incentive objective, however, use this method to solve the following problems: the performance goal setting should reflect the true state of the operating company; this method can cause volatility risk employee income stock option. When an employee has to work hard, but because of other reasons not to achieve performance objectives, will actively work to hurt the enthusiasm of employees; the employee income uncertainty, risk and uncertainty associated with shareholder equity dilution. If the company performance is outstanding, the shareholder may face greater degree of dilution, therefore, the existing shareholders must weigh between control rights and the balance of benefits, achieve the best long-term interests.

Five, the exercise price is determined
Holding company stock option employees can buy shares in the company within a specified period of time at a certain price, the purchase process is called the exercise, the certain price for the exercise price. At the time, the stock option is no cash earnings, exercise, holders of the proceeds is between the exercise price and the exercise date market price. For owners of companies and stock options, the exercise price is one of the key provisions of stock option plan.
For listing Corporation, frequently used method is the reference index, two stock market, making the stock option exercise price. The privately held company, due to the lack of the open market reasonable reference standard, usually use some method for determination of the value of the company in accordance with the date of the grant to pricing, such as net assets per share of the company to develop the exercise price. The benefits of doing so can be efficiently, objectively reflect the current business performance, the main drawback is the index can not fully reflect the value of the company, the financial index is easy to manipulate and induce managers short-term behavior.

Be right, and the right option six
Typically, companies in the grant date given (awarded) the employee stock option, employee can not immediately exercise, but need to wait for a period of time in order to obtain the exercise of rights. This waiting time is called to be the right time. The employees get exercise right date is called the day of right.
Under normal circumstances, the right to the grant date is as the starting date calculation. The following table:
The date of the grant awarded shares granted by the right of ownership
In October 1, 2006 October 1, 10002007 300
In October 1, 2008 300
In October 1, 2009 400
But some companies to hire employees, or by other date (if the company is sold or successful IPO date) as the starting date, to the right of this, stock option plans of the company shall be clearly defined.
The company can determine the employee exercise date "to the right, in order to better achieve the schedule" stock option plans to retain and motivate action. Stay right schedule includes two aspects: the right day, got the right size. To the right are the following: ① schedule on the date of the grant one-time gains rights, namely the staff at the grant date can perform all options; the employee for a certain number of years were right, stock options plan under all qualifications may take 3-5 years time, some options may even refined to quarter, month, week, day by day and got the right to arrange the right size; ③ gained by using the progressive, the employee after each won the day by day right right can get more exercise qualification; according to the performance of the company to decide the right situation, for example, with the stock price, earnings per share, earnings before interest and tax profit income and other indicators for the scale of the provisions, only to one or more of the above goals, employees can get the qualification.
The above methods have their own advantages and disadvantages:
A one-time grant, the grant date for the employee is hired on the day, to attract talents to join the company; can also be granted in the staff to continue working after a few years, such as 3 or 5 years, so as to improve the employee turnover cost of job hopping, and effectively and retain employees; can also be awarded a fixed target in the company, such as certain sales income or public offering, to motivate employees to achieve the established objectives, and hard work. A one-time grant in the actual operation is simple and feasible, is often a return to employee compensation, the achievement but, in encouraging employees to continuously for the company, the establishment of employee ownership of the enterprise culture, is inadequate.
Staging the stock options granted, management is more complicated. Especially in the level of performance based company awarded, needs assessment mechanism perfect, fair and open, in order to avoid the conflict appears in the operation, affect the company's internal unity. However, staging awarded, the company and employees interests bind more tightly, so that employees can realize enterprise success and failure and grief.
For the private holding company, if will be the right date in initial public offerings, there may be interest distribution inequality. On the one hand, the employee will therefore get more profit, on the other hand, the public investors will find the value of the company may be because the stock option plan to exercise and reduce. Therefore, in order to promote the successful initial public offering, ensuring price stability, often the staff got the right date postponed to the company's initial public offering for a period of time.

Seven, option
Option means that employees pay the exercise price, got the stock act. Employees choose to exercise the option of company stock, is on the fair market value greater than the exercise price, the option is in the money. Stock option plans are generally specified vesting date, exercise method, and the relevant taxes paid. In general, the employee should submit the notice to the company, include the following items: authorized person name, identity, address; can exercise the option grant date amount; to exercise the option payment amount.
Employees exercise notice and payment of the price, date received, regarded as the vesting date, including the main way of exercise: cash exercise: This is the most common method of exercise, the authorized employee will buy the stock option plan under the stock price to pay to the company, if it is NQSO, the staff should attach should pay withholding tax. The stock swap exercise: This is a more complex method of exercise, is the top management. Employees will have the company stock as a means of payment, has obtained the right to buy the option of company shares. The value of shares in accordance with the exercise day stock fair market value to determine, to recover the stock or to company stock shares, or will be revoked. The sale of the agent that day: the method of exercise is also very common, also known as non cash exercise, refers to the authorized person in the exercise, the exercise date, which issued a directive on securities broker, indicating its sold all or part of the shares, to pay the required for the right price and taxes payable. Therefore, the company will generally advance selected one or several securities broker company, and sign the entrustment agreement. The cashier / loan exercise: the company allows employees to use a promissory note, or borrow funds to the corporation loan way, to pay the exercise price and the tax payable.

The validity period of eight, stock options, cancellation and termination
The validity of stock options is from the date the stock options granted during can be executed (i.e. stock options during life). The validity period is longer, the employee stock option in from the possibility of obtaining high yield is greater, because over time, stocks are usually added. Generally speaking, the stock option waiting to date, valid period of not more than 10 years. Part of the reason is America law incentive stock option of not more than 10 years, from the management point of view, the incentive stock options and non standard stock options to determine the effective period of the same can simplify the management. From the stock is often used as a short-term incentive tools used in consideration of stock option, a period of 10 years, also has its practical significance, if the effective period is too long, the stock option plan is more like a retirement system.
The above mentioned waiting period and is valid for all employees in stock option life working during their stay in the situation of the company. However, often appear to be the case, all staff can perform in the stock option holdings in the company or will end, in the options within the validity period of the work. The company must formulate corresponding policies, clearly shows that, if the death, disability, retirement and staff active or non active termination of employment with the company, its stock option should be how to deal with.
According to the reason for termination is different, treatment options are very different: if the employee retirement, or separation, then most companies usually require employees in 30 days (no longer than 3 months) in the stock option plan, lapse of time. If employees are disabled, it usually requires the exercise in 1 years. If the employee to resign, or been sacked, companies tend to cancel all the employee stock option. Whether it is right or not, has been awarded the right but not the exercise of stock options, both because employees without leaving and failure.