Non-qualified stock option is a type of equity compensation that provides an organization flexible and effective ways of attracting and motivating employees. This gives an opportunity to the employees to grow their wealth. In such cases the employees are provided with a document which is known as a non-qualified stock option agreement. The agreement sets forth the specific terms of the employee’s options.
There are few aspects made clear in the agreement which are as follows:
- The date on which the employee can exercise their option.
- It is clear whether the employees can exercise their options in stages.
- The date on which the option will terminate and whether it is possible to exercise the option after the employment terminates.
- The option price that is the price at which the employees are entitled to purchase the option shares
- The number of shares that the employee is allowed to purchase
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