How have courts interpreted the value of an employee's continued employment as consideration for the exercise of stock options?

In Newberger v. Rifkind (1972) 28 Cal.App.3d 1070, a corporate employer granted stock options to five of its employees. Pursuant to a written option agreement, the options vested completely after five years of employment. The employees worked beyond the five years. The principal shareholder died three years before the options matured and the executor of his estate refused to honor the options. (Id. at p. 1072.) The trial court concluded that the options were not supported by consideration and had therefore been revoked upon the death of the grantor. The appellate court disagreed, and held that the employees' continued employment, with knowledge of the options, was consideration for the option agreement. (Id. at pp. 1073-1075.) The court rejected the defendant's contention that the employee's continued work efforts did not supply consideration because they had not been bargained for and held that the bargain was implied from the circumstances and that there was an implied request by the optionors that the optionees continue working in exchange for granting the options. (Id. at p. 10741075.)

In Novack v. Bilnor Corp. (1966) 26 A.D.2d 572, a decision of the appellate division of a New York trial court, an employer sent its employee a letter offering him two percent of the company's net profits for the year if he remained on the job until October 31, 1961. The court construed the letter as a unilateral offer, which the employee accepted by staying on the job for the specified period. It also held that the employee's continued employment was sufficient consideration to impose liability on the employer. (Id. at p. 573.)