Stock Option Grant | Vesting Schedule | Option Exercise | Startup Advisory Services | Tax Treatment 409A
This Advisor Equity Agreement dated [Date] between [Company Name], a [GmbH / Delaware C-Corp] ("Company"), and [Advisor Name] ("Advisor") grants stock options in exchange for advisory services. Legal Framework: IRC §422 (ISO options), IRC §409A (deferred comp), German EStG (income tax), Delaware DGCL §161-158.
1.1 Grant Terms: Company grants Advisor the right to purchase [X,XXX] shares of [share class: Common Stock / Preferred Stock] at exercise price of EUR/USD [X.XX] per share (409A fair market value per IRC §409A)
1.2 Grant Date: [Date]
1.3 Option Type: ☐ ISO (Incentive Stock Option per IRC §422) ☐ NSO (Non-Qualified Stock Option) ☐ RSU (Restricted Stock Units)
1.4 Option Pool: Shares reserved from Company's authorized option pool. If insufficient shares available at exercise, Company must conduct board authorization to increase authorized shares per Delaware DGCL §161
2.1 Cliff & Vesting:
| Vesting Type | Details |
|---|---|
| Vesting Schedule | [4-year vest / 1-year cliff (25% vests after 1 year, remainder monthly over 36 months] |
| Acceleration (Double-Trigger) | If Company acquired + Advisor's role terminated without cause within [12 months], all unvested options accelerate + become fully vested |
| Single-Trigger (Optional) | ☐ Upon Change of Control, all unvested options vest immediately (at Advisor election) |
2.2 Vesting Conditions: Options vest only if Advisor provides ongoing advisory services per Section 3 (consulting arrangement = primary vesting condition)
2.3 Forfeiture: Unvested options forfeit if Advisor: (a) terminates advisory relationship without cause before next vesting date, (b) breaches confidentiality/non-compete per Section 4
3.1 Scope of Services: Advisor shall provide [X hours/month] of advisory services including:
3.2 No Employment: Advisor is INDEPENDENT CONTRACTOR, NOT employee. No salary, benefits, insurance provided by Company per IRC §3401 (employment tax)
3.3 Advisor Expense Reimbursement: Company may reimburse reasonable out-of-pocket expenses (travel, meals) with pre-approval. No salary or cash compensation (equity only).
4.1 Confidentiality: Advisor shall maintain strict confidentiality of Company information, financials, fundraising, technology, customer data per BGB §203 (indefinite until public disclosure)
4.2 Non-Disparagement: Advisor shall NOT publicly criticize Company, founders, products, or strategy during and after advisory relationship (indefinite obligation)
4.3 Non-Solicitation (Optional): During advisory relationship + [12 months] after termination, Advisor shall NOT recruit Company employees or solicit customers per BGB §90
4.4 Breach Remedy: Breach triggers: (a) vested options become exercisable at discount or forfeited, (b) injunctive relief available, (c) liquidated damages per Section 5
5.1 Exercise Period: Vested options exercisable anytime from [vesting date] until [expiration date, typically 7-10 years] per IRC §422(d) (10-year max for ISOs)
5.2 Exercise Notice: Advisor submits written exercise notice specifying number of shares + payment method
5.3 Payment Method: ☐ Cash ☐ Cashless exercise (broker-assisted, no cash required) ☐ Net-settle (exercise + sell simultaneously, net proceeds to Advisor)
5.4 Exercise Mechanics: Upon exercise + payment, Company issues stock certificate or book-entry shares within [10 business days]. Advisor becomes shareholder with all voting + dividend rights.
6.1 ISO vs. NSO Taxation:
| Option Type | US Tax Treatment |
|---|---|
| ISO (Incentive Stock Option) | No income tax on exercise (if held 2yr from grant, 1yr from exercise). Long-term capital gains on sale per IRC §422 |
| NSO (Non-Qualified) | Ordinary income on exercise = (Fair Market Value - Exercise Price) taxable at grant date per IRC §83(a) |
6.2 409A Compliance: Exercise price = 100% of fair market value as of grant date per independent 409A valuation. Below-market exercises = deferred compensation subject to IRC §409A tax penalties (20% + 6% interest)
6.3 Advisor Tax Responsibility: Advisor responsible for all income, payroll, capital gains taxes. Company provides Form 3921 (ISO) or Form 3922 (NSO) for tax reporting.
6.4 German Tax (if applicable): Advisor with German tax residency: Options subject to EStG §8 (income tax on grant/exercise per German rules). Company issues Bescheinigung for German tax authorities.
7.1 Definition of Change of Control: (a) sale of >50% of Company equity, (b) merger/consolidation, (c) sale of substantially all assets per Delaware DGCL §260-263
7.2 Acceleration Trigger (Optional): Upon Change of Control, Company MAY elect to: (a) accelerate all unvested options (become exercisable immediately), OR (b) convert options to acquirer's equivalent awards with same vesting
7.3 Cash-Out: If acquirer does NOT assume options, Company must provide cash equivalent = (FMV at sale - exercise price) × shares
8.1 Termination for Cause: Advisor breaches confidentiality, non-compete, or non-solicitation → all unvested options immediately forfeit (vested options still exercisable per Section 5.1)
8.2 Termination Without Cause: Company terminates advisory relationship → vested options remain exercisable, unvested options forfeit
8.3 Exercise Window After Termination: Vested options exercisable until [90 days] after termination (or standard expiration date, whichever is earlier)
Law: ☐ German law (GmbHG/EStG) ☐ [US State, typically Delaware] | Disputes: Binding arbitration per DIS / FAA
Company: ____________ | Advisor: ____________ | Date: [Date]