A share option agreement is a contract between a company and shareholder where the latter loans shares to collect revenue on options that would otherwise sit. By executing this agreement, option holders are able to enrich their portfolios without committing to long-term ownership with a company. The agreement is mutually beneficial since companies also get to avoid options going untraded for extended periods of time.
The share option agreement typically has a starting and ending date within the contract. However, should contract parties wish to extend the contract or amend any other terms within, that is usually possible, per the terms of the contract itself.
Below is a list of common sections included in Share Option Agreements. These sections are linked to the below sample agreement for you to explore.
SHARE OPTION AGREEMENT
This Share Option Agreement (this “ Agreement ”) is made and entered into as of the Grant Date specified below by and between Guardforce AI Co., Limited, an exempted company formed under the laws of the Cayman Islands (the “ Company ”), and the participant named below (the “ Participant ”).
Name of Participant:
1. Grant of Option .
1.1. Grant . The Company hereby grants to the Participant an option (the “ Option ”) to purchase the total number of Ordinary Shares of the Company equal to the number of Option Shares set forth above, at the Exercise Price set forth above. The Option is being granted pursuant to the terms of the Company’s 2022 Equity Incentive Plan (the “ Plan ”). Capitalized terms used but not defined herein will have the meanings ascribed to them in the Plan.
1.2. Type of Option . The Option is intended to be either a Non-qualified Share Option (i.e., not an Incentive Share Option) or an Incentive Share Option within the meaning of Section 422 of the Code, as indicated above, although the Company makes no representation or guarantee that the Option will qualify as an Incentive Share Option. To the extent that the aggregate Fair Market Value (determined on the Grant Date) of the Ordinary Shares with respect to which Incentive Share Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Non-qualified Share Options.
1.3. Consideration . The grant of the Option is made in consideration of the services to be rendered by the Participant to the Company and is subject to the terms and conditions of the Plan.
2. Exercise Period; Vesting .
2.1. Vesting Schedule . The Option will become vested and exercisable in accordance with the Vesting Schedule specified above until the Option is 100% vested. The unvested portion of the Option will not be exercisable on or after the Participant’s termination of Continuous Service.
2.2. Expiration . The Option will expire on the Expiration Date set forth above, or earlier as provided in this Agreement or the Plan.
3. Termination of Continuous Service .
3.1. Termination for Reasons Other Than Cause, Death or Disability . If the Participant’s Continuous Service is terminated for any reason other than Cause, death or Disability, the Participant may exercise the vested portion of the Option, but only within such period of time ending on the earlier of (a) the date that is three months following the termination of the Participant’s Continuous Service or (b) the Expiration Date.
3.2. Termination for Cause . If the Participant’s Continuous Service is terminated for Cause, the Option (whether vested or unvested) shall immediately terminate and cease to be exercisable.
3.3. Termination Due to Disability . If the Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise the vested portion of the Option, but only within such period of time ending on the earlier of (a) the date that is 12 months following the Participant’s termination of Continuous Service or (b) the Expiration Date.
3.4. Termination Due to Death . If the Participant’s Continuous Service terminates as a result of the Participant’s death, or the Participant dies within a period following termination of the Participant’s Continuous Service during which the vested portion of the Option remains exercisable, the vested portion of the Option may be exercised by the Participant’s estate, by a person who acquired the right to exercise the Option by bequest or inheritance or by the person designated to exercise the Option upon the Participant’s death, but only within the time period ending on the earlier of (a) the date that is 12 months following the Participant’s death or (b) the Expiration Date.
3.5. Extension of Termination Date . If following the Participant’s termination of Continuous Service for any reason the exercise of the Option is prohibited because the exercise of the Option would violate the registration requirements under the Securities Act or any other state or federal securities law or the rules of any securities exchange or interdealer quotation system, then the expiration of the Option shall be tolled until the date that is thirty (30) days after the end of the period during which the exercise of the Option would be in violation of such registration or other securities requirements.
4. Manner of Exercise .
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4.2. Payment of Exercise Price . The entire Exercise Price of the Option shall be payable in full at the time of exercise to the extent permitted by applicable statutes and regulations, either: (a) in cash or by certified or bank check at the time the Option is exercised; (b) by delivery to the Company of other Ordinary Shares, together with an instrument of transfer in favour of the Company, with a Fair Market Value on the date of delivery equal to the Exercise Price (or portion thereof) due for the number of shares being acquired, or by means of attestation whereby the Participant identifies for delivery specific shares that have a Fair Market Value on the date of attestation equal to the Exercise Price (or portion thereof) and receives a number of shares equal to the difference between the number of shares thereby purchased and the number of identified attestation shares (a “ Stock for Stock Exchange ”); (c) through a “cashless exercise program” established with a broker; (d) by reduction in the number of shares otherwise deliverable upon exercise of such Option with a Fair Market Value equal to the aggregate Exercise Price at the time of exercise; (e) by any combination of the foregoing methods; or (f) in any other form of legal consideration that may be acceptable to the Committee.
4.3. Withholding . Prior to the issuance of shares upon the exercise of the Option, the Participant must make arrangements satisfactory to the Company to pay or provide for any applicable federal, state and local withholding obligations of the Company. The Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise of the Option by any of the following means: (a) tendering a cash payment; (b) authorizing the Company to withhold Ordinary Shares from the Ordinary Shares otherwise issuable to the Participant as a result of the exercise of the Option; provided, however , that no Ordinary Shares are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (c) delivering to the Company previously owned and unencumbered Ordinary Shares. The Company has the right to withhold from any compensation paid to a Participant.
4.4. Issuance of Shares . Provided that the Exercise Agreement and payment are in form and substance satisfactory to the Company, the Company shall issue the Ordinary Shares registered in the name of the Participant, the Participant’s authorized assignee, or the Participant’s legal representative which shall be evidenced by entry in the register of members of the Company and share certificates representing the shares with the appropriate legends affixed thereto, appropriate entry on the books of the Company or of a duly authorized transfer agent, or other appropriate means as determined by the Company.
5. No Right to Continued Service; No Rights as Shareholder . Neither the Plan nor this Agreement shall confer upon the Participant any right to be retained in any position, as an Employee, Consultant or Director of the Company. Further, nothing in the Plan or this Agreement shall be construed to limit the discretion of the Company to terminate the Participant’s Continuous Service at any time, with or without Cause. The Participant shall not have any rights as a shareholder with respect to any Ordinary Shares subject to the Option prior to the date of exercise of the Option.
6. Transferability . The Option is not transferable by the Participant other than to a designated beneficiary upon the Participant’s death or by will or the laws of descent and distribution, and is exercisable during the Participant’s lifetime only by him or her. No assignment or transfer of the Option, or the rights represented thereby, whether voluntary or involuntary, by operation of law or otherwise (except to a designated beneficiary upon death by will or the laws of descent or distribution) will vest in the assignee or transferee any interest or right herein whatsoever, but immediately upon such assignment or transfer the Option will terminate and become of no further effect.
7. Change in Control . In the event of a Change in Control, the Committee may, in its discretion and upon at least ten (10) days’ advance notice to the Participant, cancel the Option and pay to the Participant the value of the Option based upon the price per share of Ordinary Share received or to be received by other shareholders of the Company in the event. Notwithstanding the foregoing, if at the time of a Change in Control the Exercise Price of the Option equals or exceeds the price paid for a share of Ordinary Share in connection with the Change in Control, the Committee may cancel the Option without the payment of consideration therefor.
8. Adjustments . The Ordinary Shares subject to the Option may be adjusted or terminated in any manner as contemplated by Section 11 of the Plan.
9. Tax Liability and Withholding . Notwithstanding any action the Company takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related withholding (“ Tax-Related Items ”), the ultimate liability for all Tax-Related Items is and remains the Participant’s responsibility and the Company (a) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with the grant, vesting, or exercise of the Option or the subsequent sale of any shares acquired on exercise; and (b) does not commit to structure the Option to reduce or eliminate the Participant’s liability for Tax-Related Items.
10. Qualification as an Incentive Share Option . If this Option is an Incentive Share Option, the Participant understands that in order to obtain the benefits of an Incentive Share Option, no sale or other disposition may be made of shares for which Incentive Share Option treatment is desired within one (1) year following the date of exercise of the Option or within two (2) years from the Grant Date. The Participant understands and agrees that the Company shall not be liable or responsible for any additional tax liability the Participant incurs in the event that the Internal Revenue Service for any reason determines that this Option does not qualify as an Incentive Share Option within the meaning of the Code.
11. Disqualifying Disposition . If this Option is an Incentive Share Option and the Participant disposes of the Ordinary Shares prior to the expiration of either two (2) years from the Grant Date or one (1) year from the date the shares are transferred to the Participant pursuant to the exercise of the Option, the Participant shall notify the Company in writing within thirty (30) days after such disposition of the date and terms of such disposition. The Participant also agrees to provide the Company with any information concerning any such dispositions as the Company requires for tax purposes.
12. Non-competition and Non-solicitation .