Stock Options Agreement Lawyer

Stock options are a way to incentivize employees to remain or join a company for a particular term. The execution of a stock option must be precise to ensure it works in the employer’s best interests. A Nakase Wade attorney can help you offer an attractive stock option whether you are a startup or a big corporation.


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What Is a Stock Option Agreement?

Stock options can serve two main advantages:

  1. Attract talent to your company
  2. Offer an incentive to keep employees around


They are best utilized if they are offered when an employee is hired or when they have been promoted. The stock option agreement is the contract offered to the employee in exchange for the stock. The stock option allows eligible employees to benefit from the increase in the company’s stock price. The agreement will dictate all the terms of the stock option, including time limits, vesting, and other conditions.

Necessary Documents for Granting Stock Options

There are four key documents in a stock option agreement:

  1. Stock Option Plan

    This is the main document for the company’s stock options issuance, and it will detail the limitations, purchase price, and the terms and conditions. It will be issued to all employees when offered a stock option.

  2. Individual Stock Option Agreement

    This document sets out the terms and conditions of the stock option agreement for each individual employee. It will specify the number of stock options the employee can claim, the vesting schedule, and other terms and conditions.

  3. Exercise Agreement

    This document dictates how employees can exercise their stocks.

  4. Notice of Stock Option Grant

    A notice of stock option grant is optional. It contains a brief summary of the grant’s material terms and often includes disclosures.

Necessary Terms and Conditions of a Stock Option Agreement

Here are some of the main provisions and terms of a stock option:

  • Grant Date

    The date on which an employee is offered the option of buying shares.

  • Exercise or Strike Price

    The price the employee is permitted to buy stock during the exercise period. This is generally fair market value, but may be offered as a range of prices.

  • Expiration Date

    The end date of the exercise period, after this date, the stock option is no longer available.

  • Exercise Date

    The period of time when an employee can purchase stock during a stock option agreement.

  • Vesting Period

    Generally, employees are not immediately able to exercise their stock options. Instead, there is a vesting period which dictates when an employee can exercise their stock.

  • Cliff

    A specific period of time during the vesting period, before the availability of any shares.

  • Clawback Provisions

    These give the employer the ability to claim unused parts of the option under certain circumstances and terms and conditions.

SEC Compliance for Stock Option Contracts

All stock option contracts must comply with SEC securities regulations. All employees who are issued with stock must receive the same notices and disclosures as any other investor. Consult a corporate lawyer before you issue stock options.

Frequently Asked Question

What is a reasonable vesting schedule for a stock option agreement?

This will depend on many things: the negotiation dynamic with the employee, the company’s stage of development, etc. Many startups have a vesting schedule of four or five years and a one or two year cliff.