Employee Share Agreement Template for United States

A legally binding agreement governed by U.S. federal and state securities laws that establishes the terms and conditions under which an employee receives company shares. The document outlines vesting schedules, transfer restrictions, rights and obligations, and ensures compliance with relevant securities regulations and tax requirements. It serves as a key component of employee compensation and retention strategies while protecting company interests.

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What is a Employee Share Agreement?

The Employee Share Agreement is a crucial document in U.S. corporate practice, typically used when companies want to provide equity-based compensation to attract, retain, and motivate employees. It establishes the framework for share ownership, including vesting conditions, transfer restrictions, and rights upon termination. The agreement must comply with U.S. securities laws, tax regulations (including IRC Sections 83 and 409A), and relevant state laws. Companies commonly implement these agreements as part of broader equity incentive plans to align employee interests with company success.

What sections should be included in a Employee Share Agreement?

1. Parties: Identification of the company and the employee receiving shares

2. Background: Context of the share agreement and its purpose within the company's equity incentive program

3. Definitions: Key terms used throughout the agreement including 'Shares', 'Vesting Date', 'Fair Market Value', etc.

4. Grant of Shares: Details of shares being granted, including number, class, and nominal value

5. Vesting Provisions: Schedule and conditions for share vesting

6. Transfer Restrictions: Limitations on transfer of shares and right of first refusal

7. Termination Provisions: Treatment of shares upon various types of employment termination

What sections are optional to include in a Employee Share Agreement?

1. Tag-Along Rights: Right to participate in sale of majority shareholding - include for key employees or when company policy requires

2. Drag-Along Rights: Obligation to participate in sale of majority shareholding - include when company wants to ensure ability to sell 100% of shares

3. Voting Rights: Specific voting arrangements for the shares - include when shares carry voting rights

4. Dividend Rights: Terms regarding dividend payments - include when shares are dividend-bearing

What schedules should be included in a Employee Share Agreement?

1. Schedule 1: Share Details: Detailed information about the shares being granted

2. Schedule 2: Vesting Schedule: Detailed timeline and conditions for share vesting

3. Schedule 3: Shareholders' Agreement: Copy or summary of relevant shareholders' agreement provisions

4. Appendix A: Tax Elections: Forms and information for relevant tax elections (e.g., 83(b) election)

5. Appendix B: Company Securities Trading Policy: Company's policy on insider trading and share dealings

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents

Jurisdiction

United States

Publisher

Genie AI

Cost

Free to use

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