Every general explanation of how stock options work, including everything else on this site, describes common patterns, not your specific terms. Your grant agreement is the actual governing document, and it’s worth being able to find and understand its key sections. This post walks through what to look for.
What’s the first thing to check?
The number of shares and the strike price, usually stated clearly near the top of the document. These are the two numbers that don’t change for this specific grant, regardless of what happens to the company’s valuation afterward, so confirming them accurately is the starting point for any other calculation.
Where do I find my vesting schedule?
Look for a section covering vesting terms, which should specify the total vesting period (commonly four years), whether there’s a cliff (commonly one year) and how much vests at that point, and how the remaining vesting is structured afterward (commonly monthly or quarterly). Some agreements reference a separate vesting schedule document or exhibit rather than stating the terms directly in the main body, so check for attachments if you don’t see this spelled out.
How do I tell if I have ISOs or NSOs?
The agreement should explicitly state the option type, often right in the title or the first paragraph (”Incentive Stock Option Agreement” versus “Nonqualified Stock Option Agreement” or similar language). If it’s not immediately obvious, look for references to Section 422 of the tax code (a marker of ISO treatment) or explicit statements about the option not qualifying as an incentive stock option.
What does the expiration term mean, and how is it different from my exercise window?
The expiration term is generally how long the option can exist at all, assuming continued employment, commonly ten years from the grant date. This is different from your post-termination exercise window, which is a separate, usually much shorter period (commonly 90 days) that applies specifically once you leave the company. Both terms typically appear in the agreement, sometimes in different sections, so don’t confuse the ten-year outer limit with what actually applies if you depart.
What should I look for regarding what happens if I leave?
Look for language covering post-termination exercise periods, and check whether it varies based on the reason for departure (voluntary resignation, termination without cause, termination for cause, death, or disability sometimes have different windows in the same agreement). Also check for any acceleration provisions, which specify whether unvested shares vest faster under specific circumstances like an acquisition, and if so, what those circumstances are.
What other terms are worth understanding?
A few others worth locating: any transfer restrictions (limits on selling or transferring shares, including rights of first refusal), any repurchase rights the company holds (particularly relevant if you’re considering early exercise), and a reference to the broader equity incentive plan document, which often contains additional terms that apply across all grants, not just yours specifically. If your agreement references a separate plan document you haven’t seen, it’s worth requesting a copy.
Worked example
Say your grant agreement states: 25,000 options, strike price $6.50, four year vesting with a one year cliff, incentive stock option, ten year expiration term, and a 90 day post-termination exercise window (extended to 12 months in the case of termination due to death or disability).
From this, you’d know your fixed cost basis for exercising ($6.50 per share), your vesting timeline (nothing for the first year, then gradual vesting through year four), your tax treatment path (ISO rules, including AMT considerations and holding period requirements for favorable treatment), and exactly how long you’d have to exercise vested shares if you left under different circumstances.
FAQ
What if I can’t find my grant agreement? Your company’s equity plan administrator or HR team should be able to provide a copy. It’s also often accessible directly through whatever equity management platform your company uses.
Do all companies use the same grant agreement template? No. Terms vary meaningfully by company, and even within the same company, terms can differ between grants issued at different times or under different plan versions.
What’s the difference between my grant agreement and the equity incentive plan? Your grant agreement covers the specific terms of your individual grant. The plan document is the broader set of rules governing all grants under that plan, and your agreement typically incorporates plan terms by reference, meaning both documents together govern your options.
Should I have a lawyer review my grant agreement? For a standard employee grant, many people read it themselves using resources like this one, though for larger or nonstandard grants (executive-level, founder-level, or with unusual acceleration terms), some people do have an attorney review it.
Can my company change my grant agreement after I’ve signed it? Generally not unilaterally for terms already granted, though future amendments to the broader plan (not your specific already-issued grant) are sometimes possible depending on the plan’s terms.
What to do next
Reading your actual grant agreement, not general explanations like this one, is the only way to know your specific terms with certainty. You can use what you find there to model your own numbers at movewealth.io.
MoveWealth is not a broker-dealer, investment adviser, or lender. This is educational content, not financial, tax, or legal advice. Consult a qualified professional about your specific situation.