Suppose employee of a startup company has a vesting agreement, saying she can execute options for 1/4 of total package each year.
What if only one year have passed and startup was bought.
Which share an employee can convert into a money then?
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It depends on the terms of the acquisition. In some cases, if the company is really nice, they will accelerate the vesting of options upon acquisition, so that you can exercise all your options upon acquisition even if they hadn't otherwise vested yet. In other cases, unvested options of the old company get converted into options of the new company.