Not sure I'm understanding you chesspoker....I don't have much experience in this area at all.  Almost 20 years ago I worked for a Toronto company that was acquired by a U.S outfit called Allied Riser Communications and I was granted employee share options, stock symbol was arcc on the Naz....but they never fell in the money, even after being re-priced two or three times...At one time ARCC had traded around $50 US if memory serves, but that was before they acquired the company I worked for...by that time the $2 billion USD they'd raised was petering out.

But anyway.....here's a hyothetical example:  I'm the CEO of a publicly traded company and I have 100,000 options priced at 65 cents that are now fully vested.  The stock price is $2.65 (I like to keep the math simple).  So I pay my company $65,000 and convert my options to shares, but I don't sell them.

Are there any tax implications right away for converting even though I'm continuing to hold the shares?  If I understand what you're saying, if I hold the resulting 100,000 shares for two years or more then I'm subject to capital gains...meaning I get half my capital gain tax free with the other half taxed at my marginal rate.