Once you've enabled electronic exercise requests, stakeholders can submit requests through their Pulley portal to exercise options. This guide walks you through reviewing, approving, and processing these requests.
What you'll learn:
How to find and review pending requests
Understanding ISO/NSO splits in requests
Adjusting tax withholding for NSO exercises
Approving requests and managing payments
What happens after approval
Prerequisites: Exercise requests must be enabled first. See How to Enable Options Exercises for setup instructions.
Understanding exercise requests
Exercise requests are stakeholder-initiated. When a stakeholder wants to exercise their options, they submit a request through their Pulley portal. The request includes:
Which option grant they're exercising
How many options they want to exercise
Their payment method preference
Tax information and withholding details
As an admin, the exercise approver reviews these requests to verify details before approving. Once approved, the exercise processes according to the payment method selected.
Your role: You're ensuring the request is accurate, the stakeholder has sufficient available options, payment method is clear, and tax withholding (for NSOs) is appropriate for their situation.
Reviewing exercise requests
When stakeholders submit exercise requests, they appear in your admin queue for review.
Finding pending requests
Navigate to Hire and retain → Exercise requests to view all pending, approved, and completed exercise requests for your company.
The request list shows key information at a glance:
Stakeholder name
Grant being exercised
Total options being exercised
Total cost
Payment method
Submission date
Current status (Pending, Approved, Paid, Complete)
Understanding ISO/NSO splits in the request list
Exercise requests may involve both Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs). These splits occur automatically when an option grant's vesting schedule exceeds the IRS $100,000 annual limit for ISOs.
Why splits occur
The IRS limits preferential ISO treatment to $100,000 worth of stock (based on fair market value at grant date) that vests in any single calendar year. When a grant's vesting schedule exceeds this limit in a year, the excess automatically becomes NSOs at the time of grant.
Pulley calculates these splits automatically based on the grant date, vesting schedule, and the company's fair market value when the grant was issued. Stakeholders see the breakdown in their portal and choose how many of each type to exercise.
What you'll see in the list:
For requests involving ISO/NSO splits, the list displays:
ISO quantity: Number of ISOs the stakeholder is exercising
NSO quantity: Number of NSOs the stakeholder is exercising
Total cost: Combined cost across both types
This visibility helps you quickly understand the scope of each request before opening it for detailed review.
Opening and reviewing request details
Click any request in the list to open the complete breakdown. The detail view provides everything you need to verify before approving.
Stakeholder information:
The top of the request shows who is exercising and their key details:
Full name
Email address
Country of residence
Employee status (current vs. former)
Important for international stakeholders: If you see a country other than United States, pause before approving. International exercises may carry tax obligations that differ from standard US treatment. Consult your payroll provider or legal team before proceeding to ensure you're handling international withholding requirements correctly.
Exercise quantities and types:
The request displays exactly what the stakeholder wants to exercise:
For grants with ISO/NSO splits:
ISO quantity being exercised
NSO quantity being exercised
Breakdown showing available vs. exercising for each type
For grants without splits:
Total quantity being exercised
Grant type (ISO or NSO)
Verify the stakeholder has sufficient available options of each type. Pulley prevents stakeholders from requesting more than they have available, but it's good practice to confirm the numbers make sense.
Cost breakdown:
The request shows separate cost calculations for each option type:
ISO portion:
Strike price × ISO quantity = Base cost
Typically no immediate income tax withholding
May trigger Alternative Minimum Tax (AMT) considerations
NSO portion:
Strike price × NSO quantity = Base cost
Plus: Estimated federal income tax withholding on the spread (FMV - strike price)
This withholding is taxed as ordinary income
The total cost represents what the stakeholder will pay. For NSO exercises, the tax withholding is included in that total.
Reviewing and adjusting tax withholding
For NSO exercises, Pulley estimates federal income tax withholding based on standard rates (defaulting to 22%). This estimate provides a starting point but may not reflect the stakeholder's full tax liability.
What the estimate doesn't include:
State income taxes
Medicare and Social Security taxes
Tax impact of higher income brackets
Other personal tax circumstances
When to consider adjusting withholding:
You might adjust the withholding rate if:
The stakeholder is a known high earner (higher tax bracket)
The stakeholder is in a high-tax state (California, New York, etc.)
The stakeholder is outside the US
Your company has a policy to withhold at specific rates for executives
The stakeholder has specifically requested a different rate
How to adjust withholding:
Find the Tax Withholding section in the request details
Click Edit
Enter the new withholding percentage
Review the updated total cost
Save your changes
Important: When you change the withholding rate, the total cost the stakeholder will pay increases or decreases accordingly. Pulley notifies the stakeholder of the new amount and asks them to re-confirm the request. They must accept the adjusted cost before the exercise can proceed.
If you're unsure what withholding rate to use, consult your payroll provider or tax advisor. They can help determine appropriate withholding based on the stakeholder's circumstances.
For ISO exercises: ISOs don't trigger ordinary income tax withholding at exercise when paid with cash, so you won't see withholding adjustments for the ISO portion. However, note that ISOs can trigger AMT, which stakeholders should discuss with their personal tax advisors.
Payment method verification
Check how the stakeholder plans to pay for the exercise:
ACH Payment (via Pulley)
If your company has a connected bank account and the stakeholder selected ACH, payment will automatically begin processing through Stripe after being approved. The funds first transfer from the stakeholder's bank account to your Stripe account before being distributed to your company bank account.
No additional action is required from you beyond approving the request. The payment happens automatically and shares will be issued once it is completed.
Manual/Offline Payment:
If the stakeholder selected manual payment, they'll pay outside Pulley's system. This happens when:
Your company doesn't have ACH enabled
The stakeholder is international (ACH currently US-only)
The stakeholder prefers to pay via wire transfer, check, or other offline method
For manual payments, you'll need to:
Approve the request
Communicate payment instructions to the stakeholder (account details, wire information, etc.)
Wait for the stakeholder to complete payment
Return to the request and mark it as Paid once you receive the funds
The exercise then completes and generates certificates
Approving Exercise Requests
After reviewing all details (stakeholder information, quantities, costs, tax withholding, and payment method), you're ready to make a decision.
To approve: The designated Exercise Approver should click the Approve button in the request detail view. This confirms you've verified everything and authorizes the exercise to proceed.
What happens next depends on payment method:
For ACH payments:
Approval triggers automatic payment processing through Plaid/Stripe
Funds transfer from the stakeholder's account to yours within 3-5 business days
Once payment clears, the exercise completes automatically
Share certificates generate and appear in the stakeholder's portal
For manual payments:
The stakeholder receives notification that their request is approved
They complete payment according to your instructions (outside Pulley)
When you receive payment, return to the request
Click Mark as Paid to finalize
Certificates generate after you mark it paid
What if you need to reject a request?
If something isn't right with the request (incorrect quantities, timing issues, or other concerns), you can reject it. Add a note explaining why so the stakeholder understands. They can submit a new corrected request if appropriate.
Common reasons for rejection:
Stakeholder no longer eligible (e.g., outside post-termination window)
Company policy requires additional approvals first
Payment method needs to be different
Timing doesn't align with company exercise windows
After Exercise Approval
Once the exercise is approved and payment completes, Pulley processes the transaction and updates your cap table automatically.
Certificate and agreement generation
For single-type exercises:
When a request involves only ISOs or only NSOs (not both), Pulley generates one certificate for the exercised shares.
For ISO/NSO split exercises:
Pulley generates two separate share certificates, one for the ISO shares and one for the NSO shares. This separation is required for proper tax documentation and reporting to the IRS.
Both certificates appear on the stakeholder's profile under their securities. Each certificate clearly indicates whether it represents ISO or NSO shares and references the originating option grant.
Cap table updates
The exercise immediately reflects in your cap table:
Stakeholder holdings change:
Their option holdings decrease by the exercised amount
Their common stock holdings increase by the same amount
The specific option grant shows reduced available quantities
Fully diluted shares adjust: Options that were part of your fully diluted share count (because they were granted) still count, but now they're common stock instead of options. Your total fully diluted count remains the same, but the composition shifts from options to issued shares.
Activity feed logging: The exercise appears in your activity feed with complete details: who exercised, which grant, quantities by type, cost breakdown, and certificates issued. This creates a permanent audit trail.
Option grant status after exercise
The original option grant updates to reflect the exercise:
Total grant quantity decreases by exercised amount
Grant history shows all exercises from this grant
Remaining options continue vesting per original schedule
Even after full exercise (where the stakeholder exercises all available options), the grant remains visible on their profile. This maintains complete grant history for compliance and reporting purposes.
Common Questions
Q: Will ISO/NSO splits affect my cap table records?
Q: Will ISO/NSO splits affect my cap table records?
A: Your total exercised shares remain the same. The split determines how the exercise is allocated between ISO and NSO types for tax and documentation purposes, but doesn't change your overall share count or ownership percentages.
Q: What should I do if a stakeholder outside the US submits an exercise request?
Q: What should I do if a stakeholder outside the US submits an exercise request?
A: Pause the request and consult your payroll provider or legal team before approving. International exercises may carry tax obligations that differ significantly from US treatment. The stakeholder's country of residence appears in the request details—use this as a signal to seek guidance before proceeding. Additionally, international stakeholders will need to use manual payment since integrated ACH is currently US-only.
Q: When should I adjust the tax withholding rate, and what rate should I use?
Q: When should I adjust the tax withholding rate, and what rate should I use?
A: Consider adjusting if the stakeholder is a high earner (higher tax bracket than the default rate assumes) or in a high-tax state. The default estimate is federal only and doesn't include state taxes or higher bracket rates. Consult your payroll provider or tax advisor for rate guidance. Keep in mind that changing the rate updates the total cost, requiring the stakeholder to re-confirm before the exercise proceeds.
Q: Can stakeholders see the ISO/NSO breakdown before submitting a request?
Q: Can stakeholders see the ISO/NSO breakdown before submitting a request?
A: Yes. When stakeholders view their option grant in their portal, they see their available ISO and NSO quantities clearly displayed. When they start an exercise request, the form shows them the cost breakdown for each type before they submit, so they make informed decisions about which quantities to exercise.
Q: Can I undo an approved exercise?
Q: Can I undo an approved exercise?
A: Once an exercise is approved and paid, it cannot be undone through the normal workflow. Exercise records are part of your cap table's permanent audit trail. If you need to correct or reverse an exercise, contact Pulley support for assistance. They'll help you handle the correction properly while maintaining data integrity.
Q: Do I need to record exercises manually if I'm using the exercise request workflow?
Q: Do I need to record exercises manually if I'm using the exercise request workflow?
A: No. Exercises submitted through the request workflow record automatically when you approve them. Manual recording (covered in a separate article) is only for exercises that occur outside this workflow such as historical exercises, offline exercises, or if you're on a plan without the request feature.