Definition of Evergreen option:
An employee option plan granting more shares into the plan each year. This number of additional new shares that are granted is based on a set percentage of the common shares of the company that are outstanding. These plans do not need the approval of shareholders nor do they have an expiration date.
An evergreen option is a provision of some employee stock option plans (ESOPs) in which additional shares are automatically granted to the plan every year. An evergreen option may also be called an "evergreen provision" or "evergreen plan.".
An evergreen plan uses a percentage of the company's common shares outstanding to determine how many options to grant. For example, if a company has 75 million outstanding shares and a 5% evergreen option provision, the company could issue 3.750 million shares worth of compensation in the first year. In the second year, the company would have 78.750 million shares outstanding and could, therefore, issue up to 3.937 million shares worth of compensation.
How to use Evergreen option in a sentence?
- While good for participating employees, evergreen options can dilute earnings and voting rights for other shareholders.
- Evergreen options allow for employees with stock options plans to automatically receive additional shares each eligible year.
- Because they typically have no set expiration date, the additional share purchases are considered 'evergreen'.
Meaning of Evergreen option & Evergreen option Definition