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Stock Option Purchase Agreement

Stock Option Purchase Agreement Template for United States

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Key Requirements PROMPT example:

Stock Option Purchase Agreement

"I need a Stock Option Purchase Agreement for my Series A startup to grant options to our new CTO, with a four-year vesting schedule and a one-year cliff, covering 50,000 shares at an exercise price of $1.20 per share starting March 1, 2025."

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Document background
The Stock Option Purchase Agreement is a crucial document used when companies want to provide equity incentives to employees, consultants, or other service providers. This agreement, subject to U.S. federal and state securities laws, outlines the complete terms of option grants, including key elements such as exercise price, vesting conditions, and exercise procedures. It's particularly important for startups and growing companies that use equity compensation as a tool for attracting and retaining talent. The agreement must comply with various regulations, including SEC rules, tax laws (particularly IRC 409A), and state-specific requirements.
Suggested Sections

1. Parties: Identifies the company granting options and the option holder

2. Background: States the company's stock option plan and intention to grant options

3. Definitions: Key terms including Exercise Price, Option Shares, Vesting Schedule, etc.

4. Grant of Option: Details of the option grant, including number of shares and exercise price

5. Vesting Schedule: Timeline and conditions for option vesting

6. Exercise Procedures: Process and requirements for exercising options

7. Term and Termination: Duration of options and circumstances of termination

8. Transferability Restrictions: Limitations on transfer of options and shares

Optional Sections

1. Change in Control Provisions: Terms applying in case of company sale or merger - used for companies considering potential exit events

2. Tax Matters: Specific tax treatment and obligations - used when specific tax elections or clarifications are needed

3. Lock-up Agreement: Restrictions on sale during IPO period - used for companies planning public offering

4. Right of First Refusal: Company's right to purchase shares before sale to third party - used for private companies wanting to control share ownership

Suggested Schedules

1. Notice of Exercise Form: Standard form for exercising options

2. Vesting Schedule: Detailed breakdown of vesting dates and amounts

3. Stockholder Agreements: Referenced agreements affecting option shares

4. Tax Election Forms: Required tax forms (e.g., 83(b) election)

5. Stock Option Plan: Copy or summary of the governing plan

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓƵ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

alex.den.21@genieai.co
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Industries

Federal Securities Laws: Primary federal regulations including Securities Act of 1933, Securities Exchange Act of 1934, SEC Rules and Regulations, Rule 701 for private companies offering equity compensation, and Regulation D for private placement exemptions

Tax Laws: Key tax regulations including IRC Section 409A (deferred compensation), Section 422 (Incentive Stock Options), Section 83 (non-qualified stock options), and provisions from the American Jobs Creation Act of 2004

Blue Sky Laws: State-specific securities laws covering registration requirements, disclosure requirements, and exemptions that vary by jurisdiction

Employment Laws: Employment-related regulations including ERISA, state-specific employment laws, and labor laws regarding compensation

Corporate Laws: Relevant corporate legislation including Delaware General Corporation Law (if applicable), state-specific corporate laws, and compliance with company bylaws and charter documents

Stock Exchange Rules: Requirements and regulations from stock exchanges such as NYSE and NASDAQ, if the company is or plans to be publicly traded

Accounting Standards: Financial reporting requirements including ASC 718 (Share-based Payment) and FASB guidelines for proper accounting of stock options

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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