The Employee Stock Options Agreement is a fundamental document used by Canadian companies to provide employees with equity compensation as part of their total remuneration package. This agreement is particularly common among growth-stage companies and established corporations looking to align employee interests with company success. The document outlines the terms under which employees can acquire company shares at a predetermined price, typically including vesting periods, exercise windows, and termination provisions. It must comply with Canadian securities legislation, tax laws (particularly the Income Tax Act), and provincial employment standards. The agreement serves multiple purposes: attracting and retaining talent, providing long-term incentives, and creating potential tax advantages for both the company and employees under Canadian tax regulations.
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1. Parties: Identification of the company granting options and the employee receiving them
2. Background: Context of the option grant and relationship between parties
3. Definitions: Definitions of key terms including Exercise Price, Option Shares, Vesting Date, Expiry Date, etc.
4. Grant of Option: Details of the stock option grant including number of shares and exercise price
5. Vesting of Option: Vesting schedule and conditions for the options to become exercisable
6. Exercise of Option: Procedures and requirements for exercising the options
7. Term and Expiration: Duration of the option grant and circumstances of expiration
8. Termination of Employment: Impact of various types of employment termination on the options
9. Regulatory Compliance: Compliance with applicable securities laws and regulations
10. Tax Matters: Tax implications and responsibilities related to the options
11. Restrictions on Transfer: Limitations on transferring or assigning the options
12. General Provisions: Standard contractual provisions including notices, amendments, and governing law
1. Change of Control: Provisions addressing what happens to options in case of company merger or acquisition
2. International Provisions: Additional terms for employees in multiple jurisdictions
3. Lock-up Agreement: Restrictions on selling shares during specific periods, typically around IPO
4. Shareholder Rights: Rights attached to shares once options are exercised
5. Clawback Provisions: Company's right to recover shares or profits in certain circumstances
6. Electronic Exercise Provisions: Procedures for electronic exercise of options if company offers this facility
1. Notice of Exercise: Form to be completed when exercising options
2. Option Grant Details: Specific details of grant including number of shares, exercise price, and vesting dates
3. Vesting Schedule: Detailed breakdown of vesting dates and quantities
4. Subscription Agreement: Agreement to be signed when exercising options to purchase shares
5. Tax Election Forms: Required tax forms including Section 7 election forms for Canadian tax purposes
6. Insider Trading Policy: Company's policy on trading restrictions and blackout periods
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