The Employee Share Agreement is a fundamental document used in South African companies to formalize employee participation in company ownership through share schemes. This agreement is typically implemented when companies wish to attract and retain talent, align employee interests with company performance, or meet B-BBEE requirements. The document outlines the complete framework for share ownership, including eligibility criteria, allocation methods, vesting schedules, and associated rights and obligations. It must comply with South African legislation, particularly the Companies Act, Income Tax Act, and Financial Markets Act, while also considering exchange control regulations for international employees. The agreement is especially crucial for companies implementing employee retention strategies, planning for listings, or undertaking corporate restructuring, as it provides clear guidelines and protections for both the company and participating employees.
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1. Parties: Identification of the Company and the Employee participating in the share scheme
2. Background: Context of the agreement, including the company's share scheme establishment and purpose
3. Definitions and Interpretation: Detailed definitions of terms used throughout the agreement and rules of interpretation
4. Eligibility and Participation: Criteria for employee participation and conditions for maintaining eligibility
5. Share Allocation: Number of shares allocated, class of shares, and allocation mechanism
6. Vesting Provisions: Vesting schedule, conditions, and requirements for share vesting
7. Purchase Price and Payment: Share price determination and payment terms if applicable
8. Rights and Restrictions: Shareholder rights, voting rights, dividend rights, and transfer restrictions
9. Taxation: Tax implications and responsibilities of both parties
10. Termination Provisions: Consequences of employment termination on share ownership
11. Confidentiality: Obligations regarding confidential information related to the share scheme
12. General Provisions: Standard legal clauses including governing law, notices, and amendments
1. Lock-up Period: Additional holding period restrictions, used when the company wants to ensure long-term employee commitment
2. Put and Call Options: Rights to sell back or purchase additional shares, included when the company wants to maintain control over share ownership
3. Performance Conditions: Specific performance targets linked to vesting, used in performance-based schemes
4. Change of Control Provisions: Special provisions for company sale or merger scenarios
5. Drag-along and Tag-along Rights: Rights in case of company sale, included for private companies
6. International Provisions: Special clauses for international employees, needed if scheme covers multiple jurisdictions
7. Share Capital Reorganization: Provisions for handling corporate actions like splits or consolidations
1. Share Allocation Details: Specific details of shares allocated including number, class, and identification
2. Vesting Schedule: Detailed timeline and conditions for share vesting
3. Acceptance Form: Employee's formal acceptance of the share offer
4. Deed of Adherence: Document binding employee to company's shareholder agreement
5. Tax Calculations: Examples or methodology for calculating tax implications
6. Company Constitution Extracts: Relevant sections of company constitution affecting share ownership
7. Share Valuation Methodology: Method and formula for share price determination
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