Share option agreements are commonly utilized by startup companies in the US. They are legal agreements hinged on the purchase or sale of a company’s equity at an agreed date and price. For the agreement to be effective, it must be properly documented with every necessary element, such as the option price, vesting period, quantity, etc. Lawrina offers a detailed share option agreement template that can help streamline the process.
A share option agreement template will include all the necessary elements to create a well-drafted and effective document. Although, what should be included in the agreement depends on the particular nature of the agreement. Regardless, a well-documented share option agreement usually includes the following elements:
Names of the parties: The agreement should clearly define the grantor and the grantee, including each party’s contact information, mailing address, etc.
Grant details: The share option agreement should list the number of shares granted, type of equity, grant date, etc.
Exercise/strike price: This is the agreed amount of money that the grantee will pay to exercise the share options.
Vesting period: The share option agreement must define the vesting timeframe and the conditions for when the agreement will become exercisable.
Date of termination: This is the date when the grantee can no longer exercise the share options.
Rights and liabilities: The agreement will list the rights that the option holder will have in the company after exercising the share options.
Governing law: The share option agreement document must define the jurisdiction that will govern the interpretation and enforcement of the agreement.
A share option agreement should typically include all the necessary elements, and should be tailored to meet the goals of the parties. To set up the agreement, the parties should discuss the terms.
A well-drafted customizable share option agreement template can be tailored to meet every business entity’s needs. Lawrina’s equity stake agreement template can be swiftly edited online to download a prepared PDF within a few minutes.
Unvested shares are handled based on the company’s policy and the terms of the share option agreement. They are rarely exercisable. In some cases, the departure of an employee leads to forfeiture of his or her share options. However, there are a few companies that allow partial vesting of the share option agreement even after the employee’s departure.
You can exercise your options after the vesting date stipulated in the share option agreement has been attained.
Even though the transferability of equity options depends largely on the terms of the share option agreement, most companies explicitly disallow the transferability of the share options to a third party.