Don't forget that the CRA says you have a capital gain at the time you exercise (not sell them) so at 2.5, Lee will have to pay taxes on a cap gain of $3,107,950 and Sam will have the same problem on a cap gain of $3,771,600. Assuming they are in Canada of course. Not sure of the story outside Canada. At any rate, this is why most folks sell everything at the time they exercise options ... they have to pay the tax and they can't take the chance that the stock drops because the CRA wants their money based on the price on the day the exercise.