Employee Stock Option Explainer Template
Three documents and three sheets that track two exercise deadlines per departing employee, not just the one written into their contract.
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Most equity explainer kits cover the same ground: what an option is, what vesting and strike price mean, and an FAQ entry for what happens if you leave. That entry usually names a post-termination exercise window, often 90 days, and stops there. Nobody recalculates it for the person who leaves. An incentive stock option carries a second deadline these kits rarely mention: a federal tax-qualification clock that lapses three calendar months after the last day worked, regardless of what the company's contract promises.
At Marloe Logistics, Anders Lindqvist is laid off holding 12,000 vested ISOs, strike price $2.10, current fair value $11.00, a spread of $106,800. His separation agreement extends his exercise window to 180 days. The federal ISO clock does not read separation agreements: it lapses three months after his last day under 26 U.S.C. § 422(a)(1), landing 91 days before his contract's deadline. Exercising in that gap still works contractually, but the spread becomes ordinary income instead of a qualifying ISO exercise, a $34,176 tax bill at 32 percent that an earlier exercise would not owe.
The pack opens with the Plain-language Explainer and Scenario Guide, then the Exercise and Tax Note, which walks through how the two deadlines diverge. The Individual Grant Summary and Vesting Timeline track every grant's next vesting event, and Scenario Values computes both deadlines for every departed holder, flagging rows where the dates differ. A 2021 survey found 60 percent of companies give departing employees 90 days to exercise after an involuntary termination (NASPP, via myStockOptions.com), close enough to the federal clock that most leavers never notice they differ.
What is in the pack
Plain-language Explainer
Defines option, strike price, vesting, cliff, spread and exercise in order, each one before it is used, for someone who has never held equity before.
Scenario Guide
What happens while you stay, if you resign, if you are let go, or if the company is acquired, with a real spread and deadline worked through.
Exercise and Tax Note
The contractual exercise window against the federal ISO clock, worked to the dollar, with a plain statement that this is not tax advice.
Individual Grant Summary
One row per grant: instrument type, shares, strike price, vesting schedule, status, and vested shares as of today or the last day worked.
Vesting Timeline
Every active grant's upcoming vesting events, flagged inside 30 days, so a cliff or a large vesting jump is known before it happens.
Scenario Values
Both exercise deadlines computed per departed holder, flagged wherever they diverge, priced against the spread at risk if neither is met.
How it works
- 1
Send your grant register
Every grant's instrument type, shares, strike price, grant date and vesting schedule, plus your most recent fair-market-value determination.
- 2
Get the explainer set
The Plain-language Explainer, Scenario Guide and Exercise and Tax Note, ready to send as-is or adapted to your own plan's specific terms.
- 3
Get the register for active grants
The Individual Grant Summary and Vesting Timeline, with upcoming cliffs and vesting events flagged inside a 30-day reminder window.
- 4
Get both deadlines for every leaver
Scenario Values computes the contractual and federal ISO deadlines separately for each departed holder, flagging any row where they diverge.
Frequently asked questions
Is this template free?
Yes. The whole pack, the explainer, scenario guide and tax note, plus all three sheets, downloads as real files with no signup. Edit with AI is a separate, optional path that creates a free account and installs the same pack as a private workspace.
How is this different from a normal equity FAQ?
Every equity communication guide we reviewed explains vesting and mentions an exercise window as a fact in an FAQ. None of them compute an actual deadline for a specific departing person, and none track that ISOs carry a second federal deadline running independently of whatever the plan's contract promises.
Is the federal ISO deadline the same for every option type?
No. It only applies to incentive stock options. Non-qualified stock options (NSOs) have no comparable federal holding-period requirement tied to exercise, so an NSO holder's only deadline is whatever the plan's contract sets, with no second clock to track alongside it.
Does River give tax advice?
No. The Exercise and Tax Note explains the mechanics, the two deadlines and how they interact, and says plainly that it is not tax advice. Anyone facing a real exercise decision near a deadline should confirm their own numbers with a tax professional before acting on them.
What if a grant is close to its cliff, not close to leaving?
That is what the Vesting Timeline is for. It is not only a leaver's register: it flags any active grant's upcoming vesting event, cliff or otherwise, inside a 30-day window, so a milestone is known about before it happens rather than discovered afterward on a total rewards statement.
How does this connect to compensation bands or a performance cycle?
Grant size is typically set by level, which a compensation band structure already defines, and refresher grants often follow a performance cycle's outcome. This pack starts once a grant exists, whatever set its size, and communicates and tracks it from there.
What format are the downloaded files?
Word documents for the Plain-language Explainer, Scenario Guide and Exercise and Tax Note, and CSV spreadsheets for the Individual Grant Summary, Vesting Timeline and Scenario Values. All open natively in Word, Google Docs, Excel or Sheets.
Stop tracking one exercise deadline when there are two
Send your grant register and current valuation. The explainer set comes back first, then a register that computes both exercise deadlines for every departed holder and flags the ones that diverge.
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