Share Option Agreement - Exercise On Conversion Date
This Share Option Agreement - Exercise on Conversion Date is between a company and a grantee, giving the grantee the right to exercise the option to subscribe for new shares when a specified event occurs.
It assumes the grantee is a director or full-time employee of the company (or both), but a different relationship (such as a contractor) can be specified.
Conversion Date triggers and notice to the grantee
The company must give notice to the grantee when the Conversion Date is to occur.
The Conversion Date is the date when the company’s shares are listed on a recognised stock exchange, the company is sold, a resolution for the winding up of the company is passed, or the statutory accounts of the company for a specified financial year are approved by the company’s board of directors.
Exercise window and when the option lapses
The option must be exercised in the 30 days following the Conversion Date, otherwise it will lapse.
If the grantee ceases to be a director, employee or other specified relationship, or dies, the option will also lapse.
Protections before exercise
The company may vary its share capital, but if new shares are issued before the option is exercised, the grantee is protected because they will be treated as a shareholder for these purposes.
The grantee is also given protection where the company’s entire share capital is to be sold or the company is to be wound up, by being given ample opportunity to exercise the option.
What happens to shares after exercise in certain circumstances
If the option is exercised but the grantee then ceases to be a director, employee or other specified relationship, or dies, their shares are offered to the other shareholders at a price specified by the auditors.
If there are any remaining shares, the grantee can require them to be bought by the company.
Key defined terms and relationship-specific drafting points
Details of the “Conversion Date”, “Option Shares”, “Ordinary Shares”, and the “Subscription Price” in the Interpretation section should be completed.
If the grantee is not an employee, the agreement provides for specified employment-related wording to be removed.
The agreement also includes other optional phrases and clauses that should be selected so as to be compatible with one another, with unused options removed.
Share Option Agreement - Exercise On Conversion Date is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.