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Option Grant Agreement

Option Grant Agreement Template for India

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Key Requirements PROMPT example:

Option Grant Agreement

"I need an Option Grant Agreement for a senior software engineer at our Series B startup, incorporating a 4-year vesting schedule with a 1-year cliff, exercise price of INR 100 per share, and standard termination provisions for a private company."

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Document background
The Option Grant Agreement is a crucial document used by Indian companies to formalize the issuance of stock options to their employees and eligible personnel. It serves as the primary instrument for implementing Employee Stock Option Plans (ESOPs), which are regulated under Section 62(1)(b) of the Companies Act, 2013, and for listed companies, under SEBI (Share Based Employee Benefits) Regulations, 2014. This agreement is particularly important in India's growing startup ecosystem and established corporate sector, where equity-based compensation is increasingly used for talent attraction and retention. The document needs to comply with Indian regulatory requirements, including securities laws, tax regulations, and foreign exchange laws when applicable. It typically includes detailed provisions about the option grant, vesting conditions, exercise procedures, and tax implications, making it essential for both private and public companies implementing equity-based compensation programs.
Suggested Sections

1. Parties: Identification of the Company and the Option Grantee with complete details

2. Background: Context of the option grant, reference to the ESOP scheme, and board/shareholder approvals

3. Definitions: Definitions of key terms including Exercise Price, Grant Date, Vesting Schedule, Option Period, etc.

4. Grant of Options: Details of the number of options granted and the terms of the grant

5. Exercise Price: Specification of the exercise price and payment terms

6. Vesting Schedule: Detailed vesting timeline and conditions for vesting

7. Exercise Period: Time period and conditions for exercising the options

8. Process of Exercise: Step-by-step procedure for exercising the options

9. Taxes and Compliance: Tax obligations and regulatory compliance requirements

10. Termination Provisions: Impact of various forms of employment termination on the options

11. Transferability Restrictions: Limitations on transfer or assignment of options

12. Governing Law and Jurisdiction: Applicable law and jurisdiction for dispute resolution

Optional Sections

1. Change in Capital Structure: Provisions for adjustments in case of corporate actions, used when company anticipates potential restructuring

2. Lock-in Period: Restrictions on sale of shares post-exercise, included for listed companies or pre-IPO situations

3. Clawback Provisions: Rights to recover options/shares in case of misconduct, used for senior executives

4. Non-Competition and Non-Solicitation: Restrictive covenants, typically included for senior employees

5. Foreign Exchange Compliance: FEMA compliance provisions, required when grantee is an NRI or foreign national

6. Put and Call Options: Rights to sell back shares to company, included for private companies

Suggested Schedules

1. Schedule 1 - Option Details: Specific details of options granted including number, exercise price, and vesting schedule

2. Schedule 2 - Copy of ESOP Scheme: Complete copy or relevant excerpts of the company's ESOP scheme

3. Appendix A - Exercise Notice: Template form for exercising options

4. Appendix B - Nomination Form: Form for nominating beneficiary in case of death

5. Appendix C - Compliance Certificates: Templates for various regulatory compliance certificates

6. Appendix D - Taxation Summary: Summary of tax implications for option grant, exercise, and sale

Authors

Alex Denne

Head of Growth (Open Source Law) @ tiktok³ÉÈË°æ | 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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Human Resources

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Company Secretarial

Board of Directors

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CEO

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HR Director

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