Incenting Employees and Consultants
What are the most important issues regarding a Stock Option Plan for Employees and Consultants?
These Core Legal Issues are addressed by various provisions of 2 Documented Core Legal Solutions: (i) the Stock Option Plan and (ii) the Stock Option Agreement (including Notice of Stock Option Grant).
What You’ll Get
Analysis and review of the nature and significance of the various material issues relating to incentives to employees and consultants provided by the Stock Option Plan and Stock Option Agreement (including specific requirements for “Qualified” Stock Options (or “Incentive Stock Options” or “ISOs”) vs. “Non-Qualified Stock Options.”
Stock Option Plan
The Stock Option Plan is a Documented Core Legal Solution that addresses various material issues, including the following:
- Designation and authority of Plan Administrator.
- Number of common shares subject to the Plan.
- Types of options included: (i) statutory/qualified/incentive stock options (“ISOs”) and (ii) non-statutory/non-qualified stock options (“NSOs”)
- NSO Terms (eligibility includes employees, non-employee members of the Board of Directors and consultants and/or other independent advisors; minimum exercise price equal to 100% of FMV except 110% of FMV for 10% shareholders; eligible methods of payment of exercise price; exercise period of up to 10 years; effect of termination of services; no shareholder rights prior to exercise; company’s right of first refusal and repurchase rights; limited transferability of options).
- ISO Terms (eligibility limited to employees only; minimum exercise price equal to 100% of FMV except 110% of FMV for 10% shareholders; maximum of $100,000 FMV in any one calendar year; maximum exercise period of 5 years.
- Definition of “Corporate Transaction” (i.e., merger, consolidation or sale of all or substantially all of assets of company to an unaffiliated third party) and effect rights of option holder.
- Effective date and term of Plan and required approval of Board and Shareholders.
Stock Option Agreement
The Stock Option Grant (including a Notice of Stock Option Grant) is a Documented Core Legal Solution that addresses various material terms and conditions of the granted options, including the following:
- Type of option granted (NSO or ISO).
- Exercise price per optioned share and the total number of optioned shares purchasable.
- Exercise period/expiration date of option.
- Lock-up period if requested by underwriter in connection with company’s first underwritten public offering.
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