Stock option plans are commonly adopted by companies that wish to increase equity participation by employees and provide equity incentives to employees. Under a typical stock option plan, the board of directors (or compensation committee) of a company may grant employees the rights to acquire stock under the plan. Typically, the option carries an exercise price (strike price) equal to the fair market value of the stock at the date of grant and is exercisable for a period of years after specified vesting criteria have been met. Vesting criteria are typically restricted to working for a period of time, although performance-based or milestone-based criteria are also possible. The design and structure of stock option plans, from a legal perspective, are driven by state corporate law, federal and state securities law, and federal tax law.      A stock option plan might provide for the issuance of restricted stock, and two types of stock options. Restricted stock is stock that is issued to the employee but typically is subject to forfeiture if the employee does not remain employed by the company for a period of time. One type of stock option is commonly called a "non-qualified stock option", which is not entitled to special tax treatment. Another type of stock option is commonly called a "qualified stock option", which if certain criteria are met, permits the holder to postpone recognizing gain until the stock is sold. Normally, for a "non-qualified stock option", gain is recognized for income tax purposes when the stock option is exercised. Consequently, "qualified stock options" can be very advantageous (although for a variety of reasons they are not as commonly used as "non-qualified stock options").      If the company issuing the option is publicly traded, the shares issuable under the plan must be registered with the US Securities Exchange Commission. The shares are registered on Form S-8. Under the NYSE and Nasdaq rules, stock option plans for listed companies must generally be approved by stockholders.      If the company issuing the option is not publicly traded, the company need not register the shares but must comply with certain rules. Rule 701 under the Securities Act of 1933, as amended, provides a safe harbor exemption from registration if its conditions are met. Private companies regularly issuing stock options should pay careful attention to complying with Rule 701.      Counsel can assist you design your stock option plan and tailor it to your company's needs. After you are satisfied with its central features, counsel can then draft the documents and assist you grant options consistent with good corporate governance and applicable legal requirements.