Puerto Rico Key Employee Stock Option Award Agreement is a legal document that pertains to the granting of stock options to key employees of a company in Puerto Rico. This agreement outlines the terms and conditions related to the offering and exercise of stock options by key employees. Key employees are high-level individuals who significantly contribute to the success and growth of a company. These professionals may include executives, managers, directors, or other essential personnel responsible for driving the company's strategic objectives. In Puerto Rico, there are several types of Key Employee Stock Option Award Agreements, each tailored to address specific circumstances and comply with relevant laws and regulations. Some key variations include: 1. Nonqualified Stock Option (NO) Agreement: This agreement grants key employees the right to purchase a specific number of company shares at a predetermined price within a specified period. Nests commonly represent stock options that do not meet the requirements for special tax treatment but still offer an attractive compensation incentive. 2. Incentive Stock Option (ISO) Agreement: SOS provide key employees with the opportunity to purchase company shares at a specific exercise price during a predetermined timeframe. These options often come with tax advantages, as they may be subject to preferential tax treatment if certain requirements are met. 3. Performance Stock Option (PSO) Agreement: SOS link the exercise of stock options to the achievement of predefined performance goals or milestones. Key employees must meet or exceed these performance targets to exercise their stock options fully. This type of agreement aligns the interests of the employee with the company's overall performance objectives. 4. Restricted Stock Unit (RSU) Agreement: RSS grant key employees the right to receive company shares upon meeting specified vesting criteria, such as continued employment or achievement of performance targets. Unlike stock options, RSS do not require an upfront payment but instead provide a future payout based on the company's stock performance. All Puerto Rico Key Employee Stock Option Award Agreements include essential provisions such as the number of stock options granted, the exercise price, the vesting schedule, the expiration date, and any applicable terms related to stock option transferability, taxation, and forfeiture. Companies adopting these agreements should ensure compliance with Puerto Rico's specific laws and regulations, including those from the Puerto Rico Internal Revenue Code and the U.S. Internal Revenue Code section 409A. Consulting with legal and tax professionals familiar with Puerto Rico's jurisdiction is crucial to ensure proper execution of these agreements and optimize their benefits for both the company and key employees.