The Stock Option Agreement serves as a critical instrument in Pakistani corporate practice for companies looking to attract, retain, and motivate key employees by offering them the opportunity to acquire ownership in the company. This document is particularly relevant for growing companies, startups, and established corporations operating under Pakistani jurisdiction who wish to align employee interests with company success. The agreement must comply with various Pakistani regulations, including the Companies Act 2017, Securities Act 2015, and relevant SECP guidelines. It typically includes detailed provisions about option grants, vesting schedules, exercise procedures, and tax implications, while also addressing corporate governance requirements specific to Pakistan. The document becomes especially important during funding rounds, potential IPOs, or when companies are establishing employee incentive programs.

1. Parties: Identification of the Company and the Option holder (Employee/Grantee)

2. Background: Context of the agreement, including reference to employment relationship and stock option plan

3. Definitions: Key terms including Exercise Price, Grant Date, Vesting Schedule, Expiration Date, and Option Shares

4. Grant of Option: Details of the stock option grant, including number of shares and exercise price

5. Vesting Schedule: Timeline and conditions for when options become exercisable

6. Exercise of Option: Process and requirements for exercising the options

7. Term and Expiration: Duration of the option and circumstances of expiration

8. Restrictions on Transfer: Limitations on transferability of the options

9. Rights as a Shareholder: Clarification of rights before and after exercise of options

10. Adjustments: Provisions for corporate events affecting share capital

11. Taxation: Tax obligations and responsibilities of the parties

12. Compliance with Laws: Requirements to comply with relevant securities and other laws

13. Governing Law: Specification of Pakistani law as governing law

14. Dispute Resolution: Process for resolving disputes between parties