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