Syndicate Legal Advisory Services prepares the complete set of documents required for a corporation or other entity to grant a stock option — an incentive stock option to an employee or a nonqualified stock option to an employee, officer, non-employee director, advisor, consultant, or contractor — under an existing equity incentive plan or, where the entity has no plan, as a stand-alone grant, in any U.S. state. A stock option grant is the transaction by which the board fixes the number of shares, the exercise price, the vesting schedule, and the term for a particular recipient and the recipient accepts those terms; its validity depends on a board approval made before or on the grant date, an exercise price supported by a fair market value determination that satisfies Section 409A (and Section 422 for an ISO), shares available under the plan’s reserve, and a securities-law exemption for the offer — and a grant that fails any of these creates a tax problem for the recipient, an accounting problem for the company, and a diligence problem in the next financing. Working from the plan, the recipient’s offer or engagement terms, and the company’s capitalization and valuation records, we draft the grant documents, the approval, and the records so that each grant 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:
Grant 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 ISO eligibility, the securities exemption, the withholding and reporting treatment, and the form of agreement); the equity promised in the recipient’s offer letter, engagement agreement, or term sheet and the reconciliation of that promise to the grant; the plan under which the grant is made and the shares available under its reserve, or the stand-alone structure where there is no plan; the option type (ISO, NSO, or a combination where the ISO $100,000 limit is exceeded); the number of shares; the exercise price and the fair market value determination supporting it; the grant date and the vesting commencement date; the vesting schedule, cliff, and any acceleration; the term and the post-termination exercise periods; whether early exercise is permitted; the exercise methods; and the company’s repurchase right and right of first refusal on exercised shares.
Review of plan and existing documents — review of the equity incentive plan and its forms of agreement, the capitalization table and option ledger for shares available and for the recipient’s prior grants, the recipient’s offer or engagement agreement, the ISO $100,000-limit worksheet, the most recent fair market value determination and its age, any investor consents required for grants above a threshold, and prior board approvals, with a written summary confirming that the grant is within the plan and the reserve, that the exercise price is supported, and that the approvals required are identified.
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 (older than twelve months or predating a material event) and an independent valuation should be refreshed before the grant.
Board or committee approval — the resolutions of the board or the compensation committee approving the grant, stating the recipient, the option type, the number of shares, the exercise price and the fair market value determination, the grant date, the vesting schedule and commencement date, the term, and the form of agreement, and authorizing the officers to issue the award; or, where the plan permits, the delegation to an officer within pre-approved parameters and the officer’s certificate of the grant; with the interested-director procedure where the recipient is a director or an affiliate of one.
Stock option agreement and notice of grant — drafting of the notice of grant and the stock option agreement (or the stand-alone option agreement incorporating the plan-level terms where there is no plan) in full, addressing: the grant, the option type, the number of shares, the exercise price, and the term; the vesting schedule and the continuous-service requirement; the exercise procedures, the methods of payment, and the conditions to exercise (the exercise agreement, the stockholder representations, and the joinder to the company’s stockholder agreements); the post-termination exercise periods for termination without cause, for cause, death, and disability, and the forfeiture of unvested shares; the acceleration provisions; the ISO provisions and the notice of disqualifying disposition, or the NSO withholding provisions; the early-exercise provisions, the repurchase right on unvested shares, and the Section 83(b) materials where early exercise is permitted; the non-transferability and the permitted transfers; the market-standoff, repurchase, and right-of-first-refusal provisions on exercised shares; the Section 409A statement; the tax acknowledgments and the recipient’s responsibility for taxes; 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 grant (Rule 701 for a compensatory grant to a service provider, with the delivery of the plan and the disclosure package required when grants exceed the Rule 701 threshold, or the applicable alternative), and the state notice filing (such as the California Section 25102(o) notice, filed within the period the state requires after the first grant under the plan or the stand-alone grant).
Exercise package (prepared in advance) — the notice of exercise and the exercise agreement with the representations, joinders, and payment instructions, the stock power and escrow documents for an early exercise, the withholding calculation worksheet, the stock certificate or uncertificated-share notice with the legends, and the Form 3921 information for an ISO exercise, so that the recipient and the company can complete an exercise without further drafting.
Records and tracking — the entry of the grant in the option ledger and the capitalization table, the update of the ISO $100,000-limit worksheet and the Rule 701 aggregate-sales monitoring, the record book entry of the approval and the executed agreement, the vesting and expiration calendar for the grant, and a one-page summary for the recipient of what was granted, when it vests, how to exercise, what happens on departure, and the tax treatment of the option type.
Deliverable: a complete, indexed grant 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 stock option agreement, the securities-law documentation and state notice filing, the exercise package, the updated option 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).