ESOP Agreement Template and How to Draft One (2026)

What an ESOP agreement is, and when you need one An ESOP (Employee Stock Option Plan) agreement gives an employee the right, but not the obligation, to buy a set number of the company's shares in the future at a price fixed today, once they have stayed and vested. It is how startups and growing companies share ownership with the people who build them, usually to attract and keep talent that early-stage cash salaries cannot. There are two documents in practice. The ESOP Scheme (or Plan) is the master document that governs the whole pool, approved by the shareholders. The Grant Letter (or Option Agreement) is the individual document given to each employee, setting out how many options they get, the exercise price, and the vesting schedule. This page gives a grant-letter template, which is what most people searching for an ESOP agreement actually need, and points to where the scheme-level rules live. You need these documents whenever you promise equity to employees. A verbal promise of options is almost worthless and causes bitter disputes later, because the number, price and vesting are never agreed in the same way twice. Putting the scheme and grant letters in place turns a promise into a real, enforceable right. Below is an ESOP grant letter template you can copy and adapt, followed by guidance on how to fill each field. This is general information, not legal advice. ESOPs engage company law, securities rules and tax, so have the scheme and grant letters reviewed by a lawyer and a tax adviser. ## ESOP grant letter template ```

ESOP GRANT LETTER Date: [DATE] To: [EMPLOYEE NAME], [designation], Employee ID [NUMBER] From: [COMPANY NAME], [CIN] This Grant is made under the Company's Employee Stock Option Plan dated [DATE] (the "Plan"), approved by the shareholders. The Plan governs and, in any conflict, prevails over this letter. 1. GRANT OF OPTIONS The Company grants you [NUMBER] stock options, each entitling you to one equity share of face value [AMOUNT], subject to vesting and the terms of the Plan. 2. GRANT DATE AND EXERCISE PRICE Grant Date: [DATE]. Exercise Price: [AMOUNT] per option (the price you pay to buy each share on exercise), being [face value / fair value / a stated figure]. 3. VESTING SCHEDULE Cliff: no options vest before the first anniversary of the Grant Date (minimum one year under the Companies Act, 2013). On that date [25%] vest. The remaining options vest [quarterly / annually] over the next [36] months, fully vested on the [fourth] anniversary. Vesting is conditional on your continued employment on each date. 4. EXERCISE Vested options may be exercised during [a window / any time until expiry] by paying the Exercise Price. Exercise period after vesting: [N years]. Method: [cash / cashless / net settlement, as the Plan allows]. On exercise, shares are issued and you become a shareholder, subject to the Articles and any Shareholders' Agreement. 5. LEAVER TREATMENT Resignation / termination (not for cause): vested options may be exercised within [N days]; unvested options lapse. Termination for cause: all options (vested and unvested) lapse. Death / permanent disability: [accelerated vesting / extended exercise window], as set out in the Plan. 6. TRANSFER Options are personal and may not be transferred, pledged or assigned, except by will or intestacy on death, as the Plan permits. 7. TAX You are liable for tax arising on exercise (as a perquisite) and on a later sale (as capital gains). The Company will deduct tax at source where required. You are advised to take independent tax advice. 8. GENERAL This letter is read with the Plan, the Articles and any Shareholders' Agreement. Governing law: India. Accepted by the Employee: __________________ Date: ______ For the Company: _________________________ Date: ______