Options Trading Tutorial

Can employee be required to sign non-compete before cashing in his options upon leaving the company?

I am trying to exercise my options upon leaving my current employer. My employer agrees, but insists that before paying out I sign a non-compete clause that is not acceptable to me. He is basing his demands on the following clause that exists in our Incentive Stock Plan: "Prior to the issuance of any Shares the Board may require the Optionee to execute a non-competition agreement and/or a trade secretes agreement in a form reasonable satisfactory to the Board". The agreement defines the term "Stock" as either issued or unissued and also has a Repurchase Agreement clause: "Repurchase Agreement: No Share shall be issued to an Optionee upon exercise of the Option unless and until the Optionee executes the then existing Shareholders Agreement. The Stock may be repurchased by the Company or other Shareholders as provided in the Shareholders Agreement" Should I be able to sell unissued stock back to the company to avoid the "issued" limitation.

Public Comments

1. The clause states what your options, and theirs are. It is legal and binding so if you wish to "cash out" you must follow the wording in the clause.
2. If it is part of the plan then your employer has every right to exercise it. Your choice is to sign or give up the rights.
3. They have no requirement based on the language you posted to buy your unissued stock. Additionally, the agreement defines stock to include non-issued stock.
4. They can require you to sign it in order to cash in your options, yes. But.... whether they can ENFORCE it once you're gone is a whole different question, and depends on where you are - Country AND State. In most US States, as an example, non-compete agreements (except in strictly limited circumstances) are counter to public policy, and legally unenforceable. A lot depends on what you do, and how broad the non-compete is, though. In my State - again, just as an example - a company account manager who deals closely and regularly with a specific customer and knows their business, and the specifics of his employers dealings with that customer, would probably be held to a non-compete agreement barring him from taking the same job with a competitor for a year. Conversely, an insurance agent who signed a non-compete that he wouldn't sell car insurance in the whole state for a year after leaving could ignore the agreement knowing it would be unlawful to enforce. Richard