A stock option agreement is a formal document created between a company and selected employees of the company whereby the employees get the option of buying the company shares at a price at which the shares are trading when the option is offered. If the price of the shares goes up in the future, the employee can buy the shares at the lesser price offered to him and thereby profit from it. He can also sell those shares later at the market price and keep the profits for himself.
This agreement is a type of incentive offered to the employees and also gets them interested in the performance of the company because if the company does well, the share prices will go up and the employees will benefit from it too. The agreement must contain the name of the employee, number of shares offered and the price of the shares, the date of creating the agreement etc.
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Sample Stock Option Agreement
Stock Option Agreement
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