Private Company Stock Options: Determining Fair Market Value in ...

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Modifications and Extensions • Examples of changes that are not considered modifications: – Shortening exercise period – Accelerating vesting – Adding right to tender shares towards exercise price – Adjustment to reflect stock split or stock dividend – Substitutions and assumptions in corporate transactions 24
Modifications and Extensions • Extensions – Exercise period is extended –Notan extension if exercise period is extended to a date no later than the later of: • the 15 th day of the third month at which, or • December 31 of the calendar year in which, the option would have otherwise expired 25
Page 1 and 2: Private Company Stock Options: Dete
Page 3 and 4: The Law • American Jobs Creation
Page 5 and 6: The Law • 409A penalizes: - Disco
Page 7 and 8: The Law • Penalty for non-complia
Page 9 and 10: Valuation Methods • To qualify fo
Page 11 and 12: Valuation Methods • Factors to co
Page 13 and 14: Valuation “Quasi” Safe Harbor
Page 15 and 16: Valuation “Quasi” Safe Harbor
Page 17 and 18: Case Study • Emerging technology
Page 19 and 20: Scenario 1 • IPO likely in 2006 o
Page 21 and 22: Scenario 3 • Neither IPO nor sale
Page 23: Modifications and Extensions • Mo
Page 27 and 28: Remedial Measures • Alternative 1
Page 29 and 30: Accounting Considerations • AICPA
Page 31 and 32: GOODWIN PROCTER LLP Boston Exchange

Private Company Stock Options: Determining Fair Market Value in ...

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