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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About this template
What is this template?
This document is a contract granting a right to buy shares that includes specific tax disclosures for Section 422 and Section 83(b) elections. It is not a direct share issuance or a restricted stock purchase agreement. It contains unique provisions for $100,000 ISO annual limits and specific post-termination exercise windows.
When should you use it?
Use this when granting future purchase rights to individuals under a formal board-approved stock plan. Use a Restricted Stock Purchase Agreement instead if the individual is buying shares immediately at grant rather than receiving an option to buy later.
What's inside
| Clause | Name | What it does |
|---|---|---|
| 1 | GRANT OF OPTION | The Company grants the Optionee a specific number of shares of common stock at a defined Exercise Price subject to the Plan's terms. |
| 2.1 | ISO annual limitation | Limits ISO treatment to $100,000 of stock becoming exercisable for the first time in any calendar year, treating any excess as NSO. |
| 2.2 | Ten percent stockholders | Requires an Exercise Price of 110% of fair market value and a five-year maximum term for certain major stockholders. |
| 4.2 | Acceleration | Permits the Company to accelerate vesting via written notice and applies specific double-trigger or single-trigger terms defined in Exhibit A. |
| 4.3 | Early exercise | Allows exercise before vesting only if permitted by Exhibit A, granting the Company a repurchase right for unvested shares upon termination. |
| 7 | TERMINATION OF SERVICE | Sets specific post-termination exercise windows, such as [post-termination exercise period] days for general termination or [disability exercise period] months for disability. |
| 8 | TRANSFERABILITY | Prohibits the transfer of the Option during the Optionee's lifetime except by will or the laws of descent and distribution. |
| 9.1 | ISO holding periods | Mandates that shares be held for two years from grant and one year from exercise to maintain favorable tax treatment. |
| 13.1 | Right of first refusal | Obliges the Optionee to offer shares to the Company before any transfer, a right that terminates upon an initial public offering. |
| 13.2 | Market standoff | Restricts the sale of shares for up to 180 days following the effective date of an initial public offering registration statement. |
Who it's for
- a US corporation granting equity incentives to an employee under an existing stock plan
- a company providing nonstatutory stock options to an independent advisor or director
- a startup using Rule 701 exemptions for compensatory equity grants
How long it runs and how it's signed
Law it's drafted under
United States note
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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