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A provision in a contract, such as a stock grant agreement, that allows your company to recover compensation if you violate certain related terms of that contract. For example, a clawback provision may require you to pay exercise gains back to the company if you leave to work for a direct competitor within a certain period after the exercise; or a clawback may become effective if the company must make a financial restatement. Legal victories by companies have boosted the popularity of these provisions. For details, see a related FAQ.

Clawbacks are more strict than noncompete forfeiture provisions, which can cause you to lose vested options.

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