| The fifth dimension is what conditions. | |
| The dimension of what conditions usually refers to the Westing and Exercise conditions. | |
| Westing has three elements. | |
| Period, Schedule and Conditions. | |
| You need to decide over what period the options must vest. | |
| The most common Westing period is four years with a one-year cliff, | |
| which means that no options can vest before the expiry of 12 months from the date of grant. | |
| That is also the minimum Westing period as per the Indian loss today, | |
| though it might change in the future. | |
| While four years is the most common Westing period, | |
| they could also vest over three or five years, | |
| or even longer if your vision dictates so. | |
| The second element is the Westing Schedule. | |
| Should they vest equally every year or in a back-ended manner, | |
| such as 10% in the first year, 20% in the second, 30% in the third, | |
| and 40% in the fourth. | |
| You could also vest them quarterly. | |
| This would again depend upon your vision and your business strategy. | |
| The third element is Westing Conditions. | |
| The options could vest merely on the basis of an employee continuing to remain in employment with the company. | |
| This is called Westing based on tenure. | |
| The options could also vest based on certain performance conditions being met. | |
| These conditions could be company levels such as revenue, profits, number of users, etc., | |
| or employee level performance parameters. | |
| So you need to define the Westing period, the Westing Schedule, and the Westing Conditions. | |
| We will talk more about this and also exercise conditions later on in our course. | |