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The unusual part is being able to buy the stock back at the Exercise Price, not the fair market value at the time. The way it's structured, it's essentially an

• brudgers 15y ago
  Not exactly. First what has been granted is the option to purchase stock, the employee need not do so if they feel it is a bad investment under the terms of the stockholder agreement. Second, the stockholder employee will receive any dividends paid by the company and in most cases this is the primary value of stock held in non-growth oriented privately held companies - keep in mind that the strike price for the options typically no more reflects market value of the stock than the repurchase price will; Both are typically fixed at a low value because this is in the company's interest because the departure of a large share holder at a time of low cashflow could easily put the company under (not to mention that stock options in a private company are primarily a tool for attracting and retaining employees not an attempt at raising cash (that's what investors and banks are for) from those who do not have it. Finally, the repurchase is only triggered by an employee leaving the company, those who survive corporate restructuring will see the benefit of the higher stock price if the company is sold.