What Is a Stock Grant Agreement?
The stock grant agreement definition is very simple. When any company wants to grant any kind of equity award to employees, then an agreement must be signed between the company and the employee. One strategy companies have used in recent years is to reward employees through employee stock grant agreement with options to purchase a certain amount of the company’s stock option grant agreement for a fixed price after a defined period of time.
Stock grants are designed to ensure employees work for the company for a set period of time. However, in this case, the employee will retain the stock only after two years of working there.
Purpose of Stock Grant Agreement
This agreement is taken by the company and employees who are working at the same place, enabling the employee(s) to get compensation in the form of stocks of the company. The purpose of this agreement is to ensure the employees are granted an equity award.
Inclusions in Stock Grant Agreement
Pursuant to the respective companies, the parties must agree to mention
- Names and details of both the parties involved
- The number of shares given to them
- The price and details
- The Grant of Restricted Stock
- The Restrictions of Transfer
- Effect of Certain Terminations of Employment.
- Effect of Change in Control.
- Forfeiture of Restricted Stock.
- Delivery of Restricted Stock.
- No Right to Continued Employment.
- Withholding of Taxes
- Successors in Interest
- Resolution of Disputes
- Modification of Agreement
- Severability
A stock grant agreement sample and the restricted stock award agreement sample outlines comprehensive terms and conditions that provide competitive intelligence investors. The clauses contained within can further be customized to meet specific business requirements.
How to Draft Stock Grant Agreement?
If you want to draft the agreement, then it is crucial that you take the help of lawyers who can help you to get the work done in an efficient manner. In this agreement,
- The name and details of the employees should be mentioned.
- The number of shares granted to the employee is also mentioned, along with the price of shares at the time they were granted to an employee. The date of the agreement should also be mentioned.
- Exercises prices (for options)
- Specific vesting dates (depending on the time of grants.
All grant agreements have standard provisions for all participants involved, the size of grants and specific terms could vary among individuals at a company. They would also contain terms that are specific including non-compete provisions.
Benefits of Stock Grant Agreement
This agreement helps the employees to remain strong, and the company can also motivate the employees to work harder. There isn’t any drawback to the agreement other than the fact that employees will retain the stock only after two years of employment with the company.
Contents of the Stock Grant Agreement
In this agreement, the obligations for both employees and the company are mentioned clearly. If the employees agree to the clauses in the agreement, then they will be able to get a certain amount of shares at a certain price. The employees are eligible to sell those shares if the price increases in the market.
For a Standard Grant Agreement, mention
- Written consent of the Committee
- Rights as a Stockholder
- Changes in Capital Structure
- Limitation of Rights
- Settlement of Stock Award
- Responsibility for Taxes
- Adjustment
- Data Privacy
- Successors and Assigns
What Happens in Case of Violation?
If an employee or the company violates the rules as stated in the agreement, then the employee might have to take help from a legal advisor. Such a violation could call for a compensation claim for the damages.
This is a business contract that provides an ability to exercise options or receive awarded shares upon vesting may be suspended until you have formally your acceptance to a grant. It severely serves you an opportunity to make good fortunes when the company is trading higher!
[ Also Read: Stock Option Agreement ]
Sample Stock Grant Agreement
Stock grant agreement sample can be downloaded from below.
