WEBVTT

00:00.000 --> 00:05.000
The fifth dimension is what conditions.

00:05.000 --> 00:12.000
The dimension of what conditions usually refers to the Westing and Exercise conditions.

00:12.000 --> 00:14.000
Westing has three elements.

00:14.000 --> 00:19.000
Period, Schedule and Conditions.

00:19.000 --> 00:24.000
You need to decide over what period the options must vest.

00:24.000 --> 00:28.000
The most common Westing period is four years with a one-year cliff,

00:28.000 --> 00:34.000
which means that no options can vest before the expiry of 12 months from the date of grant.

00:34.000 --> 00:39.000
That is also the minimum Westing period as per the Indian loss today,

00:39.000 --> 00:41.000
though it might change in the future.

00:41.000 --> 00:45.000
While four years is the most common Westing period,

00:45.000 --> 00:48.000
they could also vest over three or five years,

00:48.000 --> 00:52.000
or even longer if your vision dictates so.

00:52.000 --> 00:55.000
The second element is the Westing Schedule.

00:55.000 --> 00:59.000
Should they vest equally every year or in a back-ended manner,

00:59.000 --> 01:04.000
such as 10% in the first year, 20% in the second, 30% in the third,

01:04.000 --> 01:07.000
and 40% in the fourth.

01:07.000 --> 01:10.000
You could also vest them quarterly.

01:10.000 --> 01:15.000
This would again depend upon your vision and your business strategy.

01:15.000 --> 01:18.000
The third element is Westing Conditions.

01:18.000 --> 01:24.000
The options could vest merely on the basis of an employee continuing to remain in employment with the company.

01:24.000 --> 01:28.000
This is called Westing based on tenure.

01:28.000 --> 01:33.000
The options could also vest based on certain performance conditions being met.

01:33.000 --> 01:39.000
These conditions could be company levels such as revenue, profits, number of users, etc.,

01:39.000 --> 01:42.000
or employee level performance parameters.

01:42.000 --> 01:49.000
So you need to define the Westing period, the Westing Schedule, and the Westing Conditions.

01:49.000 --> 01:57.000
We will talk more about this and also exercise conditions later on in our course.