Stock Option Agreement (US)
This template is a standard agreement for granting stock options to individuals under a company's established stock plan. It includes provisions for both Incentive Stock Options (ISOs) for employees and Nonstatutory Stock Options (NSOs) for contractors or advisors, covering essential terms like vesting schedules, exercise prices, and tax implications.
STOCK OPTION AGREEMENT
Note: This template grants a stock option to an individual under a company stock plan. It supports both option types. An Incentive Stock Option (ISO) is the tax-advantaged form available only to employees and only if the requirements of Internal Revenue Code Section 422 are met. A Nonstatutory Stock Option (NSO) has no statutory limits and is used for contractors, advisors, non-employee directors, and for grants that exceed the ISO limits. Choose the type in Section 2 before completing anything else. Complete every yellow field and complete Exhibit A.
Note: This Agreement assumes the Company has adopted a written stock plan approved by its stockholders. Section 422(b)(1) requires an ISO to be granted under a plan that states the aggregate number of shares issuable and the class of employees eligible, and that was approved by stockholders within 12 months before or after adoption. An option granted without that plan cannot be an ISO.
This Stock Option Agreement (this "Agreement") is entered into as of [grant date] by and between [full legal name of the company], a [state of incorporation of the company] corporation (the "Company"), and [full name of the optionee] (the "Optionee").
RECITALS
WHEREAS, the Company maintains the [name of the stock plan] (the "Plan"), which has been approved by the stockholders of the Company; and
WHEREAS, the Company desires to grant to the Optionee an option to purchase shares of its common stock on the terms set forth in this Agreement and in the Plan;
NOW, THEREFORE, in consideration of the mutual covenants set forth below, the parties agree as follows:
1. GRANT OF OPTION
1.1 The Company hereby grants to the Optionee, effective as of the Grant Date, an option (the "Option") to purchase [number of option shares] shares of the Company's common stock (the "Shares") at the Exercise Price set forth in Section 3, subject to the terms of this Agreement and the Plan. In the event of any conflict between this Agreement and the Plan, the Plan controls.
2. TYPE OF OPTION
Note: Use either Option A or Option B.
Note: Use Option A if the Optionee is an employee of the Company or of a parent or subsidiary corporation and the Company wants to give tax-advantaged treatment. Use Option B if the Optionee is a contractor, advisor, or non-employee director, or if this grant would exceed the ISO limits. Section 422(b) permits an ISO to be granted only to an employee, so a grant to a non-employee is an NSO whatever the paperwork says.
Option A (Incentive Stock Option): The Option is intended to qualify as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). To the extent the Option fails to qualify as an incentive stock option for any reason, it will be treated as a nonstatutory stock option.
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This version is drafted for US law generally. Contract, employment and consumer rules vary by state — for example on non-competes and at-will employment. Tell GitLaw which state applies and it adjusts the draft.
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