The Equity Incentive Agreement is a fundamental document used by companies in India to formalize the granting of equity-based compensation to employees, directors, or consultants. This agreement is particularly crucial in the current business environment where companies seek to attract and retain top talent by offering ownership stakes. It must comply with various Indian regulations, including the Companies Act, 2013, SEBI guidelines, and relevant tax laws. The document typically outlines the specific terms of equity grants, including the number of shares or options, vesting schedules, exercise prices, and conditions for forfeiture. It's especially relevant for startups and growing companies looking to conserve cash while offering competitive compensation packages. The agreement also addresses key regulatory requirements specific to Indian jurisdiction, such as foreign exchange regulations when applicable, and necessary corporate approvals.
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1. Parties: Identification of the Company and the Employee/Recipient of the equity incentives
2. Background: Context of the agreement, including the company's equity incentive plan and the basis for granting equity incentives
3. Definitions: Key terms used throughout the agreement, including specific Indian regulatory terms
4. Grant of Equity Incentives: Details of the equity incentives being granted, including type, number, and price
5. Vesting Schedule: Timing and conditions for vesting of the equity incentives
6. Exercise Terms: Conditions and procedure for exercising the equity incentives
7. Regulatory Compliance: Compliance requirements under Indian laws, including SEBI regulations and Companies Act provisions
8. Tax Obligations: Tax implications and responsibilities of both parties under Indian tax laws
9. Restrictions on Transfer: Limitations on transfer of equity incentives and associated rights
10. Termination Provisions: Impact of employment termination on equity incentives
11. Representations and Warranties: Standard declarations by both parties
12. Governing Law and Jurisdiction: Specification of Indian law as governing law and jurisdiction for disputes
13. Miscellaneous: Standard boilerplate provisions including notices, amendments, and severability
1. Lock-in Period: Additional restrictions on sale of shares post-exercise, typically included for senior management
2. Shareholders' Rights: Special rights attached to the shares, included when offering voting or other specific rights
3. Foreign Exchange Compliance: Required when the recipient is a non-resident of India
4. Clawback Provisions: Provisions for recovering vested equity in case of misconduct, typically for senior executives
5. Tag-Along Rights: Included when offering protection in case of majority shareholder sale
6. Non-Competition and Confidentiality: Additional restrictive covenants, often included for senior employees
7. Corporate Governance: Included when granting board seats or special governance rights
1. Schedule 1 - Details of Equity Incentive Grant: Specific details of the grant including number of shares/options, grant price, and vesting dates
2. Schedule 2 - Vesting Schedule: Detailed breakdown of vesting timeline and conditions
3. Schedule 3 - Exercise Notice Format: Template for exercising the equity incentives
4. Schedule 4 - Regulatory Compliance Checklist: List of compliance requirements under Indian law
5. Schedule 5 - Shareholders Agreement Extract: Relevant provisions from the company's shareholders agreement
6. Appendix A - Copy of Equity Incentive Plan: Complete copy of the company's equity incentive plan
7. Appendix B - Tax Computation Examples: Illustrations of tax implications under different scenarios
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