Employee share option agreement

Use this agreement to grant a share option to an employee based on an increased valuation of the shares. He may be employed in any capacity. Suitable for any business. The conditions to trigger option to be entered by you. Example given.

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About this agreement

This document will be bought by any company to set up a motivational option scheme for an employee working in any capacity.

It is assumed that the employee will achieve some goal or target to qualify. The option is triggered by the increase in the value of the company calculated as set out either in the agreement or in a schedule. The terms are for you to decide.

We have provided an example deal, but it is for you to enter details of your exact deal. That may be any arrangement you like.

We have provided for the optioner to pay for the option and also to pay for the shares on exercise of the option. Either or both provisions may be deleted or the sums increased or reduced.

The actual result or event which will trigger the exercise of the option is for your commercial judgement. If there is no decisive event which proves the increase in value, you may need to ask your accountant for a suggestion, with reference to balance sheet value or profit as shown on the annual accounts.

Alternatives to this agreement

Net Lawman sells variations on this agreement for:

  • the trigger being performance criteria;
  • options for a third party: a consultant or contractor or marketer;

You can see these at Share option agreements.

This would also be a good time to put into place a new shareholders’ agreement whilst you are in charge of the shares. If you wait until the optioner is a new shareholder, you will have to take greater account of what he wants. Look at Shareholders' agreements.

The law in this agreement

This document is drawn under basic contract law: no special rules, no tax arrangements, no complications. The law which is followed is of Companies Act, 2008,.

Contents

  • Definitions and interpretation
  • Optional reference to employment contract
  • Option data
  • Grant of option
  • Conditions for exercise of option
  • What happens if contract of employment is terminated before option is exercised
  • Warranties by the company
  • Draft notice by optioner to exercise the option
  • Draft list of matters which may affect optioner’s decision
Draftsman

This document was written by a solicitor for Net Lawman. It complies with current South Africa law.

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