Management Option Pool LBO Question

Assume I'm a sponsor doing an LBO, and I establish a 5% Management Option pool, with a $10 strike price. Assume upon close, the company has 100 shares outstanding.

At year 4, I IPO 50% of the company in a primary offering, meaning I issue an additional 100 shares. The company now has 200 shares outstanding. Assume the price per share is now above the strike price.

In year 5, Management is allowed to exercise their options and does so.

Is the cash inflow to the business: 1) $50 ($10 x (100 shares x 5%), with management receiving 5 shares. OR 2) $100 ($10 x (200 shares x 5%), with management receiving 10 shares.