Stock options clause: Copy, customize, and use instantly
Introduction
A stock options clause outlines the terms under which employees, executives, or other stakeholders can receive, exercise, and transfer stock options. It helps clarify eligibility, vesting schedules, expiration rules, and restrictions to ensure alignment with the company’s equity incentive plan. This clause is commonly used in employment agreements, shareholder agreements, and stock option plans.
Below are templates for stock options clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard stock options clause
This clause grants stock options with a defined vesting schedule and exercise price.
The [Company] hereby grants to [Recipient] the option to purchase [number] shares of common stock at an exercise price of [price] per share, subject to the terms and conditions of the [Company's] Stock Option Plan. These options shall vest in accordance with the following schedule: [vesting details].
Stock options clause with time-based vesting
This version requires the recipient to remain employed for a certain period before exercising options.
Stock options granted under this Agreement shall vest over a period of [number] years, with [percentage]% of the options vesting on each anniversary of the grant date, provided that the Recipient remains continuously employed by the [Company].
Stock options clause with performance-based vesting
This clause ties vesting to specific performance metrics.
Stock options granted under this Agreement shall vest upon the Recipient achieving the following performance milestones: [list of performance goals]. If the milestones are not met within [timeframe], the unvested options shall expire.
Stock options clause with expiration upon termination
This version sets an expiration date for options if employment ends.
If the Recipient’s employment with the [Company] terminates for any reason, all unvested stock options shall be forfeited immediately. Vested options must be exercised within [number] days following termination, after which they shall expire.
Stock options clause with acceleration upon change of control
This clause accelerates vesting if the company is acquired or undergoes a change of control.
In the event of a Change of Control, as defined in the [Company's] Stock Option Plan, all unvested stock options held by the Recipient shall immediately vest and become exercisable. The Recipient shall have the right to exercise all vested options within [number] days following the Change of Control.
Stock options clause with clawback provision
This version allows the company to reclaim options if the recipient violates specific terms.
If the Recipient engages in any activity that violates the terms of this Agreement, including but not limited to engaging in competitive activities, breaching confidentiality obligations, or committing financial misconduct, the [Company] reserves the right to revoke any unexercised stock options and require repayment of any profits realized from prior exercises.
Stock options clause with early exercise feature
This clause allows the option holder to exercise unvested options under specific conditions.
The Recipient may elect to exercise stock options prior to vesting, subject to the execution of a Restricted Stock Agreement. Any shares acquired through early exercise shall remain subject to the original vesting schedule and shall be subject to forfeiture if the Recipient fails to satisfy the vesting requirements.
Stock options clause with tax withholding requirement
This version requires the recipient to cover applicable taxes upon exercise.
Upon exercise of any stock option, the Recipient shall be responsible for all applicable taxes, including federal, state, and local income taxes, and shall authorize the [Company] to withhold the required amounts from compensation or any other amounts payable to the Recipient.
Stock options clause with blackout period restriction
This clause restricts the exercise of options during certain periods.
The Recipient shall not be permitted to exercise stock options during any blackout period imposed by the [Company] to comply with insider trading laws or corporate policies. Any attempted exercise during a blackout period shall be deemed void.
Stock options clause with non-transferability restriction
This version prevents recipients from transferring their options.
Stock options granted under this Agreement shall not be transferable, assignable, or subject to any encumbrance, except in the event of the Recipient’s death, in which case the options may be exercised by the Recipient’s legal representative within [number] months of the date of death.
Stock options clause with post-termination exercise window
This clause gives recipients additional time to exercise vested options after leaving the company.
If the Recipient’s employment is terminated for any reason other than cause, the Recipient shall have [number] months from the date of termination to exercise any vested stock options. Any options not exercised within this period shall expire automatically.
Stock options clause with right of first refusal
This version requires the company to have the first opportunity to repurchase shares before they are sold to a third party.
If the Recipient intends to transfer shares acquired through the exercise of stock options, the [Company] shall have the right of first refusal to repurchase the shares on the same terms offered to any third party. If the [Company] declines to exercise this right within [number] days, the Recipient may proceed with the sale.
Stock options clause with adjustment for stock splits and mergers
This clause ensures option terms remain fair if the company undergoes stock-related changes.
In the event of a stock split, stock dividend, recapitalization, or similar corporate transaction, the number of stock options granted and the exercise price shall be adjusted proportionally to prevent dilution or undue enrichment of the Recipient.
Stock options clause with forfeiture upon termination for cause
This version ensures that recipients who are terminated for misconduct lose their stock options.
If the Recipient is terminated for cause, including but not limited to fraud, violation of company policy, or other material misconduct, all vested and unvested stock options shall be immediately forfeited without compensation.
Stock options clause with expiration after a fixed term
This clause sets a maximum term for stock options.
All stock options granted under this Agreement shall expire no later than [number] years from the grant date, regardless of vesting status, employment status, or other factors.
Stock options clause with cashless exercise option
This version allows option holders to pay for shares by selling part of their holdings.
The Recipient may exercise stock options using a cashless exercise method, whereby shares may be sold immediately to cover the exercise price and any applicable taxes, with the remaining shares delivered to the Recipient.
Stock options clause with dividend exclusion
This clause prevents unexercised options from receiving dividends.
The Recipient shall not be entitled to any dividends or other shareholder rights with respect to stock options until such options have been exercised and shares have been issued.
Stock options clause with vesting continuation during approved leave
This version allows vesting to continue while an employee is on an approved leave of absence.
If the Recipient takes an approved leave of absence, stock option vesting shall continue according to the normal vesting schedule, unless otherwise required by law or company policy.
Stock options clause with restrictions on pledging or hedging
This clause prohibits the use of options or shares as collateral for loans or hedging.
The Recipient shall not pledge, hedge, or otherwise use stock options or shares acquired through exercise as collateral for any loan or financial transaction, unless expressly permitted in writing by the [Company].
Stock options clause with alternative settlement in cash
This version allows the company to settle options in cash instead of issuing shares.
At its discretion, the [Company] may settle stock option exercises in cash equal to the difference between the exercise price and the fair market value of the shares on the exercise date, rather than issuing shares.
Stock options clause with cap on total option grants
This clause ensures that stock option grants do not exceed a defined percentage of total shares.
The total number of stock options granted under this Agreement shall not exceed [percentage]% of the total outstanding shares of the [Company] at any given time.
Stock options clause with clawback for financial restatements
This version allows the company to reclaim stock options if financial statements are corrected.
If the [Company] is required to restate its financial statements due to material noncompliance with financial reporting requirements, any stock options granted based on such financial performance shall be subject to forfeiture or repayment as determined by the [Company].
Stock options clause with special treatment for retirement
This clause allows options to continue vesting after retirement.
If the Recipient retires after reaching [age] and completing [number] years of service, unvested stock options shall continue to vest according to the original schedule, provided that the Recipient complies with all post-retirement restrictions.
Stock options clause with right to convert into restricted stock
This version allows option holders to exchange options for restricted stock with different terms.
The Recipient may elect to convert unvested stock options into an equivalent number of restricted stock units, subject to the terms of the [Company's] equity plan.
Stock options clause with binding effect on successors
This clause ensures stock option rights transfer to successors if the company is acquired.
All rights and obligations under this stock option grant shall be binding upon and inure to the benefit of the [Company's] successors and assigns, including any acquiring entity in the event of a merger or sale of the [Company].
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.