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Option Exchange

An alternative to the straight repricing of underwater stock options. Under this program, a company offers its employees, on a strictly voluntary basis, the ability to trade in their old options for fewer options at a lower exercise price. The company sets an exercise price and share number so that the exchange ratio results in the total value of the previous and the total value of the new set of options being essentially the same. See a related FAQ on approaches companies apply to underwater stock options.

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