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Basically, you’ll use an option exercise notice along with your Employee Stock Option Plan.
Essentially, an Employee Stock Option Plan (ESOP) is a mechanism where a company confers the right to an employee to buy shares in the company, at a specified price, in a specified period. This is the exercise period. During the exercise period, the employee has the right to exercise (or purchase) the option at that specified price.
Typically, when an employee chooses to exercise the options, this is when you draft an option exercise notice or letter. Importantly, this is to formally convey the employee’s intent to purchase the options from the company.
What is in an Option Exercise Letter?
Firstly, this formal letter to exercise options must state the following
- Intent to exercise the option
- Number of shares to be exercised
- Price of each share to be paid
- Total amount to be paid and the form of payment to be made
- Full name and address of the option holder
When Should You Use an Option Exercise Notice?
Generally, you can easily generate an option exercise notice when an employee decides to exercise his or her options. Simply log into Zegal, type in a few pieces of information and you’re on your way.
ESOPs, Stock Options, and What You Need to Know About Them
To learn more, a great resource to learn more about stock options can be found here at Investopedia.
In summary, easy to use templates for your employee shareholding needs can allow your finance team to save time and provide a self-service model to employees. Generating an option exercise notice on Zegal allows your employees to take control. They’ll be able to automatically create a written and signed record of the transaction.
You Might Also Like
Along with this document, make sure you see these other templates in our library:
- Shareholder Agreement
- Option Agreement
- Employee Option Repurchase Agreement
- Share Appreciation Rights Plan
- Share Option Plan
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