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No. While some companies send registered letters to outgoing employees with the number of shares they can buy and the cost, along with how many days they have to exercise the options, no law requires this. It is your obligation to know your personal grant information and the terms of your stock plan. See your stock option plan and grant agreement for the rules and procedures of vesting and post-termination exercise. Companies follow these rules and timeframes very rigidly.
Your company is likewise not obligated to alert you of the eventual expiration or forfeiture of your options, whether you remain employed at your company or leave. Your company also will not automatically exercise any in-the-money options before they expire (unless your plan has this provision, which is rare). Again, it is your responsibility to monitor key dates and to understand the exercise procedures.
The case of Sheils v. Pfizer (US 3rd Circuit Court of Appeals, No. 04-3724, September 2005) reinforces that courts view these concerns as 100% your obligation: "stock option agreements are not contracts but rather irrevocable offers which the optionee is free to accept or reject. They thus do not impose duties on the optionor [i.e., the company] other than the obligation not to revoke the offer during the period before it expires, and the conditional obligation to follow through on the offer should the optionee accept it." Another court decision taking a similar view is Mariasch v. Gillette (US 1st Circuit Court of Appeals, No. 07-1549, March 2008). The retired employee, whose valuable options expired, unsuccessfully argued that he did not receive the usual "friendly reminder" in an email or letter and therefore should have been allowed to exercise after the deadline.
Furthermore, you should not rely on spoken information about your post-termination exercise period: your stock plan documents and related statements are the only reliable and binding sources that determine how long you have to exercise options after termination. See, for example, Vague v. Bank One Corporation (Delaware Court of Chancery, No. 18741, February 2006). In this case, an executive relied on unintentionally inaccurate spoken information about the post-termination exercise period. The court ruled that it was not reasonable for him to rely on this orally communicated information while ignoring readily accessible written information from the company that correctly stated the expiration date of the options.
Another case surrounds a misguided reliance on written information other than the stock plan (First Marblehead Corp. v. House, US District Court of Massachusetts, No. 04-11263-PBS, November 2005). The company sent an executive a memorandum and a worksheet about his stock options that mentioned their 10-year term but not the post-termination exercise period of 90 days provided by the stock plan. After losing the options by failing to exercise within three months after he quit his job, the executive unsuccessfully tried to claim that the memo and worksheet superseded his stock plan. As the court's ruling points out, the stock plan, "not the terms of a memorandum and worksheet with arguably conflicting terms, govern the exercisability of options." Above all else, your stock plan controls. |
