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Each week, PactSafe will discuss and post about specific standardized agreements and how they can be turned into one-click contracts. Last week, we covered COVID-19 Test Informed Consent Forms. This week, we're focusing on Stock Option Grant: what it is, why it's typical signing method isn't ideal, and how it can be turned into a one click contract on the PactSafe platform.
A one click contract is like any other contract, but it's presented in a way that allows the person signing it to do so by simply clicking on it. With very few exceptions, any contract can be signed with a single click on a website, from a phone, in an email - anywhere you meet your customers digitally, you can deliver a 1-click contract.
A stock option grant is an opportunity to purchase stock in the company for which he or she works. Typically, the grant price is set as the market price at the time the grant is offered. It’s used as an additional incentive to motivate members of an early stage company to contribute to the success of the business. When the market price of the company goes up because the team is working hard and performing, naturally the value of the Stock Options granted to the employee go up as well.
Early employees at companies like Amazon and Google are worth millions (or even billions) of dollars. Stock Option Grants typically have a “waiting period” where the employee must be with the company for a certain duration of time before the Stock Option Grant vests, incentivizing loyalty and strong job performance. As the company succeeds, the market price of the company continues to grow.
Key things to know about Stock Option Grants:
It’s a gift and is compensation that doesn’t need to be paid back.
Qualified stock option grants are eligible for favorable tax treatment, but typically cannot be passed on to others, unless in a will or trust. (Source: Investopedia)
Even when an employee leaves a company, they have the opportunity to purchase stock options that have vested in their time at the company for the market price of the options.
The Stock Option Grant is typically signed by the employee who’s being issued the stock options and by the employer who is issuing the stock options.
Typically Stock Option Grants are signed by a member of the legal team generating the document with the Stock Option Grant and sending to the employee and a company representative to print and sign. That document could also be loaded into an eSignature platform and sent to the employee.
The time it takes to load in a document, tag the right fields for signature, and deliver it is time that should be spent by an expensive outside counsel, founder, or executive.
A Stock Option Grant is generally a completely standard agreement for all new employees of an early stage company and only a few variables change for each employee:
Issue date of the stock options
Name of the employee
Date of the stock options being issued
Market or “Exercise” price of the options (typically as a result of a quarterly 409A valuation).
The document can also be pre-approved and pre-signed by the company representative, which is an unnecessary step in the workflow.
A Stock Option Grant as a 1-click contract eliminates the manual effort of filling in repetitive information in a document and removes steps of the process for busy executives or founders. Stock Option Grants should be quick and painless so the team can get back to doing what they do best: building an amazing company that makes those stock options worth millions!
1-click contracts are absolutely binding. Also known as “clickwraps,” courts have enforced millions of contracts accepted by a single click. The court cases Newell Rubbermaid v. Storm and ADP v. Lynch and Halpin clearly indicate that online "clickwrap" agreements are enforceable. PactSafe’s platform was built to help ensure 1-click contracts are created in compliance with all the best practices established in 1000’s of court cases over the past 20+ years.
Learn more about PactSafe's Contactless Contracting and Policy Kit