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What is Stock Option Agreement?

Stock Option Agreement A Stock Option Agreement grants employees or stakeholders the right to purchase company shares, specifying grant terms, exercise price, and vesting conditions.



Sample template:



STOCK OPTION AGREEMENT

This Stock Option Agreement (the "Agreement") is made and entered into as of the date last executed by the parties hereto (the "Effective Date"), by and between TechGenius Inc, a Delaware corporation (the "Company"), and Benjamin R Mitchell ("Optionee").



1. GRANT OF OPTION

1.1. Grant of Option


Subject to the terms and conditions of this Agreement, the Company hereby grants to Optionee the right and option to purchase from the Company an aggregate of 50,000 shares of the Company's common stock, par value $0.01 per share (the "Common Stock"), at the Exercise Price (as defined below) per share (the "Option").



2. EXERCISE PRICE

2.1. Determination


The exercise price per share of Common Stock subject to the Option (the "Exercise Price") shall be $10.00, which represents the fair market value of the Common Stock as determined by the Board of Directors of the Company (the "Board") as of the Effective Date of this Agreement.



3. VESTING SCHEDULE

3.1. Vesting Schedule


The Option shall become vested and exercisable incrementally, as follows:
(a) 25% of the Option shall vest on the first anniversary of the Effective Date;
(b) an additional 25% of the Option shall vest on the second anniversary of the Effective Date;
(c) an additional 25% of the Option shall vest on the third anniversary of the Effective Date; and
(d) the remaining 25% of the Option shall vest on the fourth anniversary of the Effective Date.



3.2. Continued Employment Required


Notwithstanding any other provision of this Agreement, the Option shall not vest unless the Optionee remains an employee of the Company (or any successor) until each applicable vesting date.



4. EXERCISE PERIOD AND CONDITIONS

4.1. Exercise Period and Expiration


The vested portion of the Option may be exercised, in whole or in part, at any time during the period (the "Option Period") commencing on the Effective Date and ending on the tenth (10th) anniversary of the Effective Date, or until the Option is terminated as provided in this Agreement.



4.2. Method of Exercise


To exercise the vested portion of the Option, the Optionee shall deliver a written notice of exercise to the Company and shall pay the aggregate Exercise Price for the number of shares specified in the notice by one or a combination of the following methods: (a) cash, (b) check payable to the order of the Company, or (c) such other method as the Company may approve in writing.



4.3. Conditions to Exercise


Optionee may not exercise the Option if (a) the issuance of the shares upon such exercise would constitute a violation of any applicable federal or state securities laws or (b) the Optionee is precluded from exercising the Option under the Company's insider trading policy or blackout periods.



5. TERMINATION OF EMPLOYMENT

5.1. Termination for Cause


If Optionee's employment with the Company is terminated by the Company for cause (as determined by the Board in its sole discretion), any unvested portion of the Option shall terminate immediately, and any vested portion of the Option shall terminate on the date of such termination.



5.2. Termination Without Cause or for Good Reason


If Optionee's employment with the Company is terminated without cause by the Company or by Optionee for good reason (as determined by the Board in its sole discretion), any unvested portion of the Option shall terminate immediately, and any vested portion of the Option shall be exercisable for a period of ninety (90) days following such termination of employment.



5.3. Termination Due to Death or Disability


If Optionee's employment with the Company is terminated due to Optionee's death or disability, any unvested portion of the Option shall terminate immediately, and any vested portion of the Option shall be exercisable for a period of twelve (12) months following such termination of employment.



6. MISCELLANEOUS

6.1. Nontransferability of Option


Except as otherwise provided herein or by the Board, the Option may not be transferred by Optionee other than by will or the laws of descent and distribution. During Optionee's lifetime, the Option may be exercised only by the Optionee.



6.2. No Rights as Stockholder


Optionee shall not have any of the rights of a stockholder with respect to the shares subject to the Option until such shares have been issued following the exercise of the Option.



6.3. Governing Law


This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to its conflict of laws principles. Any action regarding this Agreement must be brought in a court of competent jurisdiction located within the United States.



6.4. Notices


All notices, requests, and other communications under this Agreement shall be in writing and shall be deemed delivered upon (a) hand delivery, (b) the next business day after delivery to a reputable overnight carrier payable by the sender, or (c) five business days after deposit in the United States mail, postage prepaid, addressed to the parties at their respective addresses set forth below or such other address as a party may designate by notice to the other party.



6.5. Entire Agreement


This Agreement and the plan document of the Company's stock option plan under which the Option is granted (the "Plan") set forth the entire understanding of the parties with respect to the subject matter hereof and supersede all prior or contemporaneous understandings, agreements, representations, and warranties, whether written or oral, relating to the subject matter of this Agreement.



6.6. Amendments and Waivers


No provision of this Agreement may be amended or waived unless such amendment or waiver is in writing and signed by both parties hereto. No waiver by any party hereto of any breach by any other party hereto of any provision of this Agreement shall be deemed a waiver of any subsequent breach of such provision or a waiver of any breach of any other provision of this Agreement.



6.7. Binding Effect


This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, heirs, and permitted assigns.



IN WITNESS WHEREOF

the parties hereto have executed this Agreement as of the date first above written.



TECHGENIUS INC


By: ____________________________


Name: [Authorized Signatory]


Title: [Title]



OPTIONEE


______________________________


Benjamin R Mitchell

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Sections of a Stock Option Agreement


In this Stock Option Agreement, you will see the following sections:

  1. Grant of Option
  2. Exercise Price
  3. Vesting Schedule
  4. Exercise Period and Conditions
  5. Termination of Employment
  6. Miscellaneous


Going indepth - Analysis of each section:

  1. Grant of Option : This section explains that the company is giving the employee (Optionee) the right to buy 50,000 shares of the company's common stock at a specific price (Exercise Price). Think of it like a coupon that allows you to buy something at a discounted price, but in this case, it's company shares.

  2. Exercise Price : This section sets the price at which the Optionee can buy the shares. In this case, it's $10.00 per share. The price is determined by the company's Board of Directors and is based on the fair market value of the shares on the agreement's effective date.

  3. Vesting Schedule : This section outlines when the Optionee can actually use the option to buy shares. The Option will become available in increments over four years, with 25% becoming available each year on the anniversary of the effective date. The Optionee must remain employed with the company for the options to vest.

  4. Exercise Period and Conditions : This section explains that the Optionee can exercise (use) the vested options to buy shares anytime within ten years from the effective date, as long as certain conditions are met. The Optionee must provide written notice and payment for the shares, and the exercise cannot violate any laws or company policies.

  5. Termination of Employment : This section describes what happens to the Option if the Optionee's employment ends. If terminated for cause, the Option is lost immediately. If terminated without cause or for good reason, the vested options can be exercised within 90 days. If terminated due to death or disability, the vested options can be exercised within 12 months.

  6. Miscellaneous : This section covers various additional terms, such as the Option being non-transferable (except by will or laws of descent), the Optionee not having stockholder rights until shares are issued, governing law, notice requirements, the entire agreement, amendments and waivers, and binding effect on successors, heirs, and permitted assigns.

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