The Stock Option Purchase Agreement serves as a fundamental document in Canadian corporate equity compensation arrangements, used when companies wish to grant employees, consultants, or directors the right to purchase company shares at a predetermined price. This agreement is particularly crucial for companies looking to attract and retain talent while managing cash flow, especially in growth sectors like technology and professional services. The document must comply with Canadian securities laws, including provincial regulations, federal tax laws, and corporate statutes. It typically follows the granting of options by the board of directors and precedes any actual exercise of options, forming part of the company's equity compensation program. The agreement includes essential details about the option grant, exercise terms, vesting conditions, and restrictions on transfer, while also addressing tax implications and regulatory compliance requirements.
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1. Parties: Identification of the company granting the options and the option holder
2. Background: Context of the option grant, relationship between parties, and purpose of the agreement
3. Definitions: Defined terms used throughout the agreement
4. Grant of Option: Details of the stock option grant including number of shares, exercise price, and grant date
5. Vesting Schedule: Timeline and conditions for when options become exercisable
6. Exercise of Option: Procedures and requirements for exercising the options
7. Term and Expiration: Duration of the option grant and circumstances of expiration
8. Restrictions on Transfer: Limitations on transferring or assigning the options
9. Compliance with Laws: Requirements for compliance with securities laws and regulations
10. Tax Matters: Tax obligations and responsibilities of both parties
11. Representations and Warranties: Statements of fact and promises by both parties
12. Termination: Consequences of employment termination or other ending scenarios
13. General Provisions: Standard legal provisions including notices, amendments, and governing law
1. Change of Control Provisions: Special terms that apply in case of company sale or merger - include for companies considering future sale or IPO
2. Lock-up Agreement: Restrictions on selling shares after exercise - important for pre-IPO companies
3. Shareholder Rights: Special rights attached to shares obtained through option exercise - include if shares have special voting or other rights
4. International Tax Provisions: Special provisions for non-Canadian residents - include for international option holders
5. Employment Status: Clarification that options don't guarantee continued employment - include for employee option holders
6. Consultant Provisions: Special terms for non-employee option holders - include for consultant or advisor option grants
1. Schedule A - Notice of Exercise: Form to be completed when exercising options
2. Schedule B - Option Grant Details: Specific details of the option grant including number of shares, price, and vesting schedule
3. Schedule C - Shareholders' Agreement: Agreement that option holder must sign upon exercise of options
4. Appendix 1 - Tax Election Forms: Required tax forms including Section 85(1) election forms if applicable
5. Appendix 2 - Securities Law Representations: Required representations and warranties regarding securities law compliance
6. Appendix 3 - Vesting Schedule Details: Detailed breakdown of vesting dates and conditions
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