Free Startup Stock Option Agreement

I. Introduction

A. Purpose of the Agreement

This Stock Option Agreement (the "Agreement") is made effective as of [Date], by and between [Your Company Name], a [State] corporation (the "Company"), and [Option Holder's Full Name] (the "Option Holder"). The purpose of this Agreement is to grant stock options to the Option Holder as part of their compensation and incentive package. This Agreement aims to align the interests of the Option Holder with those of the Company and to encourage their contribution towards the growth and success of the Company.

B. Definitions

1. "Option"

An "Option" refers to the right granted to the Option Holder to purchase shares of the Company's common stock under the terms set forth in this Agreement. The Option provides a mechanism for the Option Holder to acquire equity in the Company, subject to the terms and conditions specified herein.

2. "Option Shares"

"Option Shares" are the shares of common stock of the Company that the Option Holder has the right to purchase under this Agreement. The number of Option Shares granted will be specified in Section III.A.

3. "Option Price"

The "Option Price" is the purchase price per share of common stock, as specified in Section III.A. This is the price at which the Option Holder can purchase the Option Shares.

4. "Vesting Schedule"

The "Vesting Schedule" refers to the timeline outlined in Section IV, which determines when the Option Holder earns the right to exercise the Options. Vesting typically occurs over a period of time to encourage long-term association with the Company.

5. "Exercise Period"

The "Exercise Period" is the period during which the Option Holder may exercise their Options, as detailed in Section V. This period starts from the date the Option becomes exercisable and continues through a specified end date.

II. Grant of Option

A. Grant

The Company hereby grants to the Option Holder the right and option to purchase 45% shares of the Company's common stock (the "Option Shares") at a price of $45,000 per share (the "Option Price"), subject to the terms and conditions set forth in this Agreement.

B. Type of Option

This Option is intended to be Incentive Stock Option.

1. Incentive Stock Option

If the Option is an Incentive Stock Option (ISO), it is intended to comply with the requirements of Section 422 of the Internal Revenue Code of 1986, as amended.

2. Non-Qualified Stock Option

If the Option is a Non-Qualified Stock Option (NSO), it does not qualify for favorable tax treatment under the Internal Revenue Code.

III. Option Price and Number of Shares

A. Option Price

The Option Price for each share of common stock subject to the Option is $45,000 per share. The Option Price is determined based on the fair market value of the Company's common stock on the date of grant.

B. Number of Shares

The total number of Option Shares granted under this Agreement is 50. This number represents the maximum number of shares that the Option Holder may purchase pursuant to this Option.

IV. Vesting and Exercise

A. Vesting Schedule

The Option shall vest according to the following schedule:

1. Initial Vesting

13% of the Option Shares shall vest on [Date], which is the first anniversary of the grant date.

2. Subsequent Vesting

20% of the Option Shares shall vest on each [Month/Year] anniversary thereafter, until the Option is fully vested.

B. Exercise of Option

1. Exercisability

The Option may be exercised only to the extent it has vested. The Option Holder must wait until the shares are vested according to the Vesting Schedule before exercising the Option.

2. Method of Exercise

The Option Holder may exercise the Option by delivering a written notice to the Company in the form attached hereto as Exhibit A. This notice must specify the number of Option Shares being purchased and be accompanied by payment of the Option Price.

3. Payment

Payment for the Option Shares may be made by cash, check, or other means as permitted by the Company. Payment must be made in full at the time of exercise.

V. Termination of Option

A.. Termination of Employment

In the event that the Option Holder's employment with the Company terminates for any reason other than death or disability, the Option Holder may exercise any vested Options within 30 days following the termination date. Any unvested Options shall expire on the termination date.

B.. Death or Disability

If the Option Holder terminates employment due to death or disability, the Option Holder or their estate may exercise any vested Options within 12 months of the termination date. Unvested Options shall expire on the termination date.

C. Expiration of Option

The Option shall expire on the earlier of:

1. The Tenth Anniversary of the Grant Date

The Option shall expire on the tenth anniversary of the grant date, unless terminated earlier as provided herein.

2. The Date Specified in Termination Sections

The Option shall expire on the date specified in Section V.1 or V.2, depending on the circumstances of termination.

VI. Restrictions on Transfer

A. Transferability

The Option and any rights hereunder are personal to the Option Holder and may not be assigned, transferred, pledged, or otherwise disposed of in any manner other than by will or by the laws of descent and distribution.

B. Company Right of First Refusal

In the event that the Option Holder desires to transfer any Option Shares, the Company shall have a right of first refusal to purchase such shares on the same terms and conditions as offered to the third party.

VII. Adjustments

A. Stock Splits and Dividends

In the event of any stock split, stock dividend, recapitalization, or similar event affecting the Company's common stock, the number of Option Shares and the Option Price shall be adjusted proportionately.

B. Merger or Acquisition

In the event of a merger, acquisition, or other change in control of the Company, the Company may take any action it deems necessary or advisable to adjust or substitute the Options in a manner consistent with the terms of this Agreement.

VIII. Miscellaneous

A. Governing Law

This Agreement shall be governed by and construed in accordance with the laws of the State of [State], without regard to its conflict of laws principles.

B. Amendments

This Agreement may be amended or modified only by a written instrument signed by both the Company and the Option Holder.

C. Entire Agreement

This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof.

D. No Rights as Shareholder

The Option Holder shall have no rights as a shareholder of the Company with respect to the Option Shares until the Option Holder has exercised the Option and purchased the shares.

E. Notices

Any notices required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or sent by registered or certified mail, return receipt requested, to the respective addresses of the parties as set forth below.

IX. Signatures

IN WITNESS WHEREOF, the parties hereto have executed this Stock Option Agreement as of the date first above written.

[Your Company Name]

Name: [Name]
Title: [Title]

Option Holder

Name: [Option Holder's Full Name]

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