Syndicate Legal Advisory Services prepares the complete set of documents required for a corporation or other entity to grant a stock appreciation right — under an existing equity incentive plan or, where the entity has no plan, as a stand-alone award — to an employee, officer, non-employee director, advisor, consultant, or contractor, in any U.S. state. A stock appreciation right entitles the holder, on exercise, to receive the appreciation in value of a stated number of shares between the grant date and the exercise date, paid in shares, in cash, or in a combination at the company’s election, without the holder paying an exercise price or the company issuing the full number of underlying shares. SARs are used where an option’s exercise price would be a barrier for the holder, where the company wants to limit dilution by settling in cash or in net shares, where an LLC or other entity cannot issue stock options in the ordinary form, or where a “phantom equity” arrangement is wanted for a company that does not intend to issue equity at all. The governing constraint is Section 409A: a SAR is exempt from deferred-compensation treatment only if its base price is at or above fair market value on the grant date, it covers service-recipient stock, and it carries no other deferral feature — and a SAR that misses those conditions, or that is modified without regard to them, becomes deferred compensation with penalty-tax consequences for the holder. Working from the plan, the recipient’s engagement terms, and the company’s capitalization and valuation records, we draft the SAR agreement, the approval, and the records so that the award is made correctly, documented consistently with the plan, and tracked from grant through exercise or expiration. State securities notice-filing fees, valuation fees, and other third-party charges are not included in the flat fee and are the sole responsibility of the client.
Scope of work includes:
Award planning and intake — a structured intake and written summary confirming the entity’s type and state; the recipient and the recipient’s relationship to the company (which determines the securities exemption, the withholding and reporting treatment, and the form of agreement); the equity or value promised in the recipient’s offer, engagement agreement, or term sheet; the plan under which the SAR is granted and the shares available under its reserve, or the stand-alone or phantom-equity structure where there is no plan; whether the SAR is free-standing or tandem with an option; the number of shares covered; the base price and the fair market value determination supporting it; the grant date and the vesting commencement date; the vesting schedule, cliff, and acceleration provisions; the term and the post-termination exercise periods; the settlement form — shares, cash, or either at the company’s election — and the net-share calculation; the company’s repurchase right, right of first refusal, and lock-up on any shares delivered; and the accounting classification the settlement form produces.
Review of plan and existing documents — review of the equity incentive plan and its SAR provisions and forms, the capitalization table and award ledger, the recipient’s offer or engagement agreement, the most recent fair market value determination and its age, any investor consents required for awards above a threshold, the stockholder agreements that will govern any shares delivered, and prior approvals, with a written summary confirming that the award is within the plan and the reserve, that the base price is supported, and that the approvals required are identified; where there is no plan, the stand-alone or phantom-equity plan document the award requires.
Fair market value support — the documentation of the fair market value on the grant date — the board’s determination and the independent Section 409A valuation or the recent financing price it relies on — with a note where the existing valuation is stale and should be refreshed before the grant.
Board or committee approval — the resolutions of the board or the compensation committee approving the SAR, stating the recipient, the number of shares covered, the base price and the fair market value determination, the grant date, the vesting schedule, the term, the settlement form, and the form of agreement, and authorizing the officers to issue the award; or the officer’s certificate of grant under a delegation the plan permits; with the interested-director procedure where the recipient is a director or an affiliate of one.
Stock appreciation right agreement and notice of grant — drafting of the notice of grant and the SAR agreement (or the stand-alone agreement incorporating plan-level terms) in full, addressing: the grant, the number of shares covered, the base price, and the term; the vesting schedule and the continuous-service requirement; the exercise procedures and the calculation of the appreciation (the excess of the fair market value on the exercise date over the base price, multiplied by the shares exercised); the settlement form, the company’s election, the net-share calculation, and the cash-settlement payment timing within the short-term deferral period; the post-termination exercise periods for termination without cause, for cause, death, and disability, and the forfeiture of unvested rights; the acceleration provisions; the tandem-option provisions where applicable; the Section 409A provisions — the base-price floor, the service-recipient-stock requirement, the prohibition on repricing or extension except as the regulations permit, and the compliant treatment of a change of control; the tax withholding provisions and the methods permitted; the non-transferability and permitted transfers; the market-standoff, repurchase, and right-of-first-refusal provisions on shares delivered; the no-right-to-continued-service and plan-controls provisions; and the acceptance mechanics and deadline, with the spousal consent where community-property rules apply.
Securities-law documentation — the exemption documentation for the award (Rule 701 for a compensatory award to a service provider, with the disclosure package required above the Rule 701 threshold, or the applicable alternative; a cash-settled SAR may be structured outside the securities laws, and the summary addresses that choice), and the state notice filing where required.
Exercise package (prepared in advance) — the notice of exercise, the appreciation calculation worksheet, the company’s settlement election, the withholding calculation and method election, the share issuance documents with the legends or the cash payment instructions, the joinders to the stockholder agreements where shares are delivered, and the Form W-2 or 1099 reporting documentation, so that the holder and the company can complete an exercise without further drafting.
Deliverable: a complete, indexed award file (electronic and hard copy) containing the written summary of the review, the fair market value support, the board or committee approval, the executed notice of grant and SAR agreement, the securities-law documentation and state notice filing where required, the exercise package, the updated award ledger and capitalization table, and the vesting calendar, with a signature-ready version of each document for execution by the company and the recipient (and the recipient’s spouse where applicable).