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The Advisor Stock Option Agreement is a crucial document used by Canadian companies to attract and retain high-quality advisors by offering equity compensation in the form of stock options. This agreement becomes necessary when a company wishes to align an advisor's interests with its long-term success by providing them with the opportunity to acquire ownership in the company. The document must comply with Canadian securities laws, tax regulations, and corporate governance requirements, including provincial securities commission rules and the Income Tax Act. It typically includes detailed provisions about the option grant, vesting conditions, exercise procedures, and implications of various termination scenarios. This agreement is particularly important for startups and growing companies that may want to conserve cash while still offering competitive compensation to their advisors.

1. Parties: Identification of the Company and the Advisor, including full legal names and addresses

2. Background: Context of the agreement, including the advisor's role and the company's desire to grant stock options

3. Definitions: Key terms used throughout the agreement, including 'Option Shares', 'Exercise Price', 'Vesting Date', etc.

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

5. Vesting Schedule: Timeline and conditions for when options become available for exercise

6. Exercise of Option: Procedures and requirements for exercising the options, including payment methods and notice requirements

7. Term and Expiration: Duration of the option grant and circumstances leading to expiration

8. Advisor Status: Clarification of the advisor's status as an independent contractor and not an employee

9. Securities Law Compliance: Acknowledgments and procedures ensuring compliance with applicable securities laws

10. Tax Matters: Tax implications and responsibilities for both parties

11. Transferability Restrictions: Limitations on the advisor's ability to transfer or assign the options

12. Termination Provisions: Effects of termination of the advisory relationship on the options

13. General Provisions: Standard legal provisions including notices, amendments, governing law, and entire agreement