If an employee with options leaves or is terminated, they will have a fixed period of time to exercise their options. The most typical time periods are 90 days or 10 years.
90 days is worse for cash-poor employees because they'll have to find the cash needed to exercise their options within 90 days, which might not be feasible for certain employees.
10 years is better for cash-poor employees because they have a decade to find the cash needed to exercise, but it can be unfair to remaining employees because someone no longer at the company is effectively diluting the rest of the employee base by holding onto their options
Although 90 days is far more common because it's more fair for existing employees, we've seen a trend towards 10 year exercise periods. A few things to consider if you choose 10 years:
Risk of employees leaving - With 4 year vesting and 10 years to exercise options, employees don't risk as much by leaving early. You can reduce this risk by having longer vesting schedules.
Administrative hassle - Terminated employees will be on your cap table for longer, which means you may need to reach out to them from time to time for things like voting on material transactions.
Worse tax outcome - You cannot issue ISOs because options with 10 year exercise periods do not qualify under as ISOs. ISOs offer tax advantages to employees because they don't have to pay taxes on exercise.
We recommend discussing the pros and cons with your lawyer.