Share option agreement

About this share option agreement

This document may be bought and provided by either the company management or the person who will be the optioner. The optioner may be associated in any capacity and in any business. He may be a corporate body. Example: a third party Internet marketer working for an Internet business or a contracted operator of a hotel or adventure park or leisure facility. Conditions to trigger option to be entered by you. The optioner is not an employee.

It is assumed that the optioner will be instrumental in increasing the value of the shares in the company. This could be measured by an initial public offering, a purchase of shares by some other person, or an accountant’s valuation on the terms on which you instruct him.

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.

We leave the defintion of the event that triggers the possibility for the exercise of the option to your commercial judgement. It could be many things, from an increase in net current assets or net profit, to an increase in shareholders' equity. If it might not be clear to the holder when the event happens that qualifies the option to be exercised, you may need suggestions from your accountant.

Alternatives to this agreement

Net Lawman sells variations on this agreement for:

• the trigger being the optioner’s performance criteria;
• options for employees;

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 of this agreement

• Definitions and interpretation
• Optional reference to main contract for work
• Option data
• Grant of option
• Conditions for exercise of option
• What happens if main contract 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