A stock grant agreement is a document used by companies to grant stock options to their employees. It is a promise to give an employee a certain number of shares of the company`s stock at a future date, at a predetermined price. A stock grant agreement is a legal document that both the company and the employee must agree to and sign.
There are two types of stock grants: vested and unvested. Vested shares are those that the employee can exercise immediately. Unvested shares are those that the employee will receive at a future point in time, subject to certain conditions being met.
Some common conditions that must be met for an employee to receive unvested shares include a certain amount of time passing since the grant date or achieving certain performance goals. These conditions are usually set forth in the stock grant agreement.
Stock grant agreements are used by many companies, particularly startups, to incentivize employees. They provide a way to align the interests of the employees with those of the company by giving them a stake in the company`s success.
Stock grants can also be beneficial for employees because they often offer tax advantages. The value of the stock is calculated at the grant date, which is usually much lower than the value at the time the employee exercises the option. This means that the employee only pays taxes on the difference between the grant price and the exercise price, rather than the full value of the shares.
Overall, stock grant agreements are an important tool for companies looking to attract and retain top talent. They offer a way to incentivize employees and align their interests with those of the company. However, it is important to carefully consider the terms of the agreement and ensure that both the company and the employee fully understand the conditions and implications of the grant.