Enterprise Management Incentives (EMI): General Requirements: Parallel Options
Granting an EMI option in parallel with another EMI option is acceptable. This means granting 2 EMI options to the same person on the understanding that only one option can ever be exercised and that the other option falls away when the first option is exercised. This concept has been used, for example, to parallel discounted options with tough performance targets with non-discounted options that have no or more lenient targets. For the purpose of the EMI limits, only the maximum number of shares which may be acquired under either option need be counted; there is no need to take into account the value of both if only one can ever be exercised.
It is not a requirement that both options are granted at the same time, but it must be clearly stated within the terms of the second option that if either of the options is exercised the parallel option will cease to be capable of exercise.
In order for this arrangement to be acceptable, the grant of the second “parallel” option must not change the terms of the first option which must remain capable of exercise, until it lapses or is given up. If the first option is exercised then the terms of the second option must provide that the second option will cease to be capable of exercise in these circumstances. Similarly, if the second option is exercised a condition of the exercise must be that the first option is either released or cancelled without consideration. Making such a provision in the terms of the second option will not be regarded as changing the terms of the first option.