Key Issues With Stock Options
Startup Codex

This is a good summary of what is involved in adopting a stock option plan in a startup.

The interesting point of this article is the summary of the issues that need to be managed for this type of operation.

The plan should give the board of directors maximum flexibility in determining how the exercise price can be paid, subject to compliance with applicable corporate law. So, for example, the consideration can include cash, deferred payment, promissory note, or stock. A “cashless” feature can be particularly attractive, where the optionee can use the buildup in the value of his or her option (the difference between the exercise price and the stock’s fair market value) as the currency to exercise the option.