The Employee Share Option Agreement is a crucial document used by UAE companies to provide employees with the right to purchase company shares at a predetermined price within a specified timeframe. This agreement is commonly implemented as part of employee retention and incentivization strategies, particularly in growth-stage companies and established corporations. The document must comply with UAE Federal Law No. 32 of 2021 (Commercial Companies Law), UAE Labor Law, and relevant securities regulations. It typically includes detailed provisions on vesting schedules, exercise procedures, and termination consequences, while accounting for UAE-specific requirements such as foreign ownership restrictions and free zone regulations where applicable. The agreement serves as a formal record of the option grant and establishes the legal framework for the eventual acquisition of shares by employees.
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1. Parties: Identification of the Company and the Employee (Option holder)
2. Background: Context of the agreement and reference to any employee share option plan
3. Definitions: Key terms used throughout the agreement including Option, Exercise Price, Vesting Period, etc.
4. Grant of Option: Details of the share options being granted, including number of shares and exercise price
5. Vesting Schedule: Timeline and conditions for when options become exercisable
6. Exercise of Options: Process and requirements for exercising options
7. Restrictions on Transfer: Limitations on transferring or assigning the options
8. Termination of Employment: Impact of various types of employment termination on the options
9. Taxes and Compliance: Tax obligations and regulatory compliance requirements
10. Corporate Events: Treatment of options in case of mergers, acquisitions, or other corporate events
11. Notices: Communication requirements and methods between parties
12. Governing Law and Jurisdiction: Specification of UAE law application and dispute resolution
1. Shareholder Rights: Details of rights as a shareholder after exercise, used when company wants to specify voting or dividend rights
2. Lock-up Period: Restrictions on selling shares after exercise, included when company requires minimum holding periods
3. Clawback Provisions: Company's right to reclaim shares or benefits, used in executive agreements or when required by policy
4. Non-Competition: Restrictions on working with competitors, included for senior employees or when required by company policy
5. Foreign Ownership Compliance: Additional provisions for ensuring compliance with UAE foreign ownership restrictions, needed when applicable
6. Free Zone Provisions: Specific provisions for DIFC/ADGM companies, included when company is in these jurisdictions
1. Option Certificate: Formal certificate detailing the specific grant of options
2. Exercise Notice: Template form for exercising options
3. Vesting Schedule Details: Detailed breakdown of vesting dates and conditions
4. Company Share Plan Rules: Reference to or extract of relevant company share plan rules
5. Regulatory Compliance Checklist: List of regulatory requirements and compliance steps
6. Shareholder Agreement Extract: Relevant provisions from the company's shareholder agreement affecting option holders
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