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How was the time period of 10 years picked? It seems rather arbitrary?

As an employee, why would I want a dangling guillotine over my options/compensation?

It's ten years from the date the options are granted, which is how long the options themselves last for.

Why 10 years and not 100 or 1000?

If this is a legal limit, can anyone explain the rationale behind the limit?

iirc 10 years is the legal limit.