…you have a participation plan in place under which employees can become shareholders of your company
… you want to give a certain employee the possibility to purchase shares in your company in the future
In an employee option participation plan, a company sets forth the rules under which it grants options to buy its shares to all or some of its employees (for example, senior employees).
Unlike a share-based participation plan, the employee does not receive shares directly, but the option to purchase shares in the future. If the conditions are met, he or she can exercise the options at a defined price, which is generally lower than the value of the shares.
The goal of the plan is broadly to incentivize key persons to stay with the company and perform by allowing them to participate in its financial success.
The actual grant of options to individual employees pursuant to the plan can be done using different legal instruments. The use of an option agreement as provided for here emphasizes that the undertakings of the company and the employee are reciprocal: on the one hand, the company undertakes to grant a certain number of options to the employee, on the other hand, the employee undertakes to pay a defined price if and when he/she exercises the options.
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