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1. Purpose
The purpose of the [COMPANY NAME] [YEAR] Equity Incentive Plan (the “Plan”) is to advance the interests of [COMPANY NAME], a [STATE OF INCORPORATION] corporation (the “Company”), and its stockholders by providing incentives to attract, retain, and motivate eligible persons whose present and potential contributions are important to the success of the Company and its Affiliates. The Plan is designed to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants who make significant contributions to the Company’s success and to allow Participants to share in such success.
2. Definitions
As used in the Plan, the following terms shall have the meanings set forth below:
“Affiliate” — any entity that, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company, including any subsidiary of the Company.
“Award” — any Option, Restricted Stock Award, or other equity-based award granted under the Plan.
“Award Agreement” — the written or electronic agreement setting forth the terms and conditions applicable to an Award granted under the Plan, including any amendment thereto.
“Board” — the Board of Directors of the Company.
“Cause” — unless otherwise defined in the applicable Award Agreement or a Participant’s employment or service agreement, (i) the Participant’s material breach of any agreement with the Company or an Affiliate; (ii) the Participant’s conviction of, or plea of nolo contendere to, a felony or any crime involving moral turpitude; (iii) the Participant’s willful misconduct or gross negligence in the performance of duties; (iv) the Participant’s fraud, embezzlement, or misappropriation of funds or property of the Company or an Affiliate; or (v) the Participant’s material violation of any written policy of the Company.
“Change of Control” — shall have the meaning set forth in Section 11 of the Plan.
“Code” — the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
“Committee” — the Compensation Committee of the Board, or such other committee of two or more directors as may be designated by the Board to administer the Plan, each member of which shall be a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act.
“Common Stock” — the common stock of the Company, par value $[PAR VALUE] per share, or such other class of shares or securities as may be applicable pursuant to Section 10.
“Company” — [COMPANY NAME], a [STATE OF INCORPORATION] corporation, and any successor thereto.
“Consultant” — any person who is engaged by the Company or any Affiliate to render consulting or advisory services and is compensated for such services, provided that such person qualifies as a consultant or advisor under the applicable rules of the Securities and Exchange Commission for registration of shares on a Form S-8 registration statement.
“Disability” — unless otherwise defined in the applicable Award Agreement, (i) a condition entitling the Participant to benefits under any long-term disability plan or policy maintained or provided by the Company, or (ii) a determination by the Committee in its sole discretion that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months.
“Employee” — any person who is an employee of the Company or any Affiliate, as determined by the Committee. Service as a director shall not be sufficient to constitute “employment” by the Company or an Affiliate.
“Exchange Act” — the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exercise Price” — the price per share at which a Participant may purchase Common Stock upon exercise of an Option, as set forth in the applicable Award Agreement.
“Fair Market Value” — as of any date, (i) if the Common Stock is listed on a national securities exchange, the closing sales price of one share of Common Stock as reported on such exchange on such date (or if no sales occur on such date, on the last trading day preceding such date on which sales occurred); (ii) if the Common Stock is not listed on a national securities exchange, the fair market value of one share of Common Stock as determined by the Board in good faith, which determination may rely on an independent appraisal meeting the requirements of Section 409A of the Code and, if applicable, Section 422 of the Code.
“Incentive Stock Option” or “ISO” — an Option that is designated as an Incentive Stock Option and that meets the requirements of Section 422 of the Code.
“Non-Qualified Stock Option” or “NSO” — an Option that is not designated as an Incentive Stock Option or that does not meet the requirements of Section 422 of the Code.
“Option” — a right to purchase shares of Common Stock at a specified Exercise Price, granted pursuant to Section 6 of the Plan.
“Participant” — any eligible person who has been granted an Award under the Plan.
“Plan” — this [COMPANY NAME] [YEAR] Equity Incentive Plan, as it may be amended from time to time.
“Restricted Stock” — shares of Common Stock granted pursuant to Section 7 of the Plan that are subject to forfeiture and restrictions on transferability as set forth in the applicable Award Agreement.
“Service” — a Participant’s employment with or service to the Company or an Affiliate as an Employee, director, or Consultant.
3. Administration
The Plan shall be administered by the Committee. The Committee shall have full and exclusive power and authority to: (a) designate Participants; (b) determine the type or types of Awards to be granted to each Participant; (c) determine the number of shares of Common Stock to be covered by each Award; (d) determine the terms and conditions of each Award, including the Exercise Price, vesting schedule, and term of each Option; (e) accelerate the vesting, exercisability, or settlement of any Award; (f) determine whether, to what extent, and under what circumstances Awards may be settled in cash, shares of Common Stock, or other property; (g) interpret, administer, and reconcile any inconsistency in, correct any defect in, or supply any omission in the Plan and any Award Agreement; (h) establish, amend, suspend, or waive any rules and procedures with respect to the Plan; and (i) make all other determinations as it deems necessary or advisable for the administration of the Plan.
All decisions and determinations of the Committee shall be final, conclusive, and binding on all persons, including the Company, its stockholders, Affiliates, Participants, and their estates and beneficiaries. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted thereunder. The Company shall indemnify each member of the Committee against any cost or expense (including reasonable attorneys’ fees) or liability arising out of any act or omission in connection with the administration of the Plan to the fullest extent permitted by applicable law and the Company’s certificate of incorporation and bylaws.
4. Shares Available for Issuance
Subject to adjustment pursuant to Section 10, the maximum aggregate number of shares of Common Stock that may be issued under the Plan shall be [SHARE RESERVE NUMBER] shares (the “Share Reserve”). The shares of Common Stock issuable under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares.
If any Award is forfeited, cancelled, terminated, expires, or lapses without the issuance of shares (or with the return of shares to the Company), the shares subject to such Award shall again be available for issuance under the Plan. Shares tendered by a Participant or withheld by the Company in payment of the Exercise Price of an Option or to satisfy tax withholding obligations with respect to an Award shall not again be available for issuance under the Plan. If shares of Restricted Stock are forfeited to the Company, such shares shall again be available for issuance under the Plan.
Subject to adjustment pursuant to Section 10, the maximum aggregate number of shares of Common Stock that may be issued pursuant to the exercise of Incentive Stock Options shall be [ISO SHARE LIMIT] shares.
5. Eligibility
Awards may be granted under the Plan to Employees, Consultants, and directors of the Company or any Affiliate, as determined by the Committee; provided, however, that Incentive Stock Options may be granted only to Employees of the Company or a subsidiary (within the meaning of Section 424(f) of the Code). The Committee shall determine, in its sole discretion, which eligible persons shall be designated as Participants and the type and amount of Awards to be granted to each Participant.
No eligible person shall have a right to be granted an Award under the Plan, and the grant of an Award to an eligible person shall not create a right in such person to be granted any additional Award. The Committee’s designation of a Participant in any year shall not require the Committee to designate such person as a Participant in any other year.
6. Stock Options
The Committee may grant Options to eligible persons in such amounts and subject to such terms and conditions as the Committee shall determine, subject to the provisions of the Plan. Each Option shall be designated in the Award Agreement as an Incentive Stock Option or a Non-Qualified Stock Option. Notwithstanding such designation, to the extent that the aggregate Fair Market Value of the shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year exceeds one hundred thousand dollars ($100,000), such Options shall be treated as Non-Qualified Stock Options.
Exercise Price. The Exercise Price per share of Common Stock subject to an Option shall be determined by the Committee at the time the Option is granted; provided that such Exercise Price shall not be less than one hundred percent (100%) of the Fair Market Value of one share of Common Stock on the date of grant. In the case of an Incentive Stock Option granted to a Participant who, at the time of grant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any subsidiary (a “Ten Percent Stockholder”), the Exercise Price shall not be less than one hundred ten percent (110%) of the Fair Market Value of one share of Common Stock on the date of grant.
Term. The term of each Option shall be set by the Committee; provided that no Option shall be exercisable more than ten (10) years from the date of grant. In the case of an Incentive Stock Option granted to a Ten Percent Stockholder, the term of such Option shall not exceed five (5) years from the date of grant. No Option may be exercised after the expiration of its term.
Vesting and Exercisability. Options shall vest and become exercisable in accordance with the vesting schedule set forth in the applicable Award Agreement. The Committee may, in its sole discretion, accelerate the vesting of any outstanding Option at any time. Unless otherwise provided in the Award Agreement, no portion of an Option that is not vested and exercisable at the time of a Participant’s termination of Service shall thereafter become vested and exercisable.
7. Restricted Stock Awards
The Committee may grant Restricted Stock to eligible persons in such amounts and subject to such terms and conditions as the Committee shall determine, subject to the provisions of the Plan. Each Restricted Stock Award shall be evidenced by an Award Agreement specifying the number of shares of Common Stock granted, the restriction period (the “Restriction Period”), the conditions under which the Restricted Stock may be forfeited to the Company, and such other terms and conditions as the Committee shall determine.
During the Restriction Period, shares of Restricted Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered. The Committee shall determine the conditions under which the restrictions on Restricted Stock shall lapse, which may include continued Service for a specified period, achievement of performance goals, or a combination thereof. Unless otherwise determined by the Committee, upon a Participant’s termination of Service during the Restriction Period, all shares of Restricted Stock held by such Participant that are still subject to restrictions shall be forfeited and returned to the Company.
Unless otherwise determined by the Committee, holders of Restricted Stock shall have the right to vote such shares and to receive dividends thereon during the Restriction Period; provided, however, that any dividends paid on shares of Restricted Stock shall be accumulated and held by the Company (without interest) and shall be paid to the holder only upon the lapsing of the applicable restrictions. If the Restricted Stock is forfeited, the accumulated dividends shall also be forfeited.
8. Vesting
The vesting schedule applicable to each Award shall be set forth in the applicable Award Agreement. Unless otherwise provided in the Award Agreement, Awards shall vest as follows: [FRACTION] of the shares subject to the Award shall vest on [VESTING CLIFF DATE OR DESCRIPTION], and the remaining shares shall vest in equal [MONTHLY/QUARTERLY] installments over the [NUMBER]-month period following the initial vesting date, subject to the Participant’s continued Service through each applicable vesting date.
Notwithstanding the foregoing, the Committee may, in its sole discretion, provide in any Award Agreement for the acceleration of vesting upon specified events, including a Change of Control (as defined in Section 11), the Participant’s death or Disability, or the achievement of specified performance milestones. In the absence of a specific provision in the Award Agreement regarding acceleration, no automatic acceleration shall occur. Vesting shall cease upon a Participant’s termination of Service for any reason, and any unvested portion of an Award shall be forfeited, except as otherwise provided in the applicable Award Agreement or as determined by the Committee.
9. Exercise of Options
A Participant may exercise a vested Option, in whole or in part, by delivering to the Company a written notice of exercise specifying the number of shares to be purchased, together with payment of the aggregate Exercise Price and any applicable tax withholding. The minimum number of shares with respect to which an Option may be exercised at any one time shall be [MINIMUM EXERCISE SHARES] shares (or such lesser number as may then be subject to the Option).
Payment of the Exercise Price may be made by one or more of the following methods, as determined by the Committee and specified in the applicable Award Agreement: (a) cash or check payable to the Company; (b) delivery of shares of Common Stock already owned by the Participant having a Fair Market Value on the date of exercise equal to the aggregate Exercise Price (provided such shares have been held by the Participant for at least six (6) months); (c) a “cashless exercise” through a broker-assisted sale of shares, whereby the Participant delivers irrevocable instructions to a broker to sell a sufficient number of shares to cover the Exercise Price and remit the net proceeds to the Company; (d) a “net exercise” in which the Company reduces the number of shares issued to the Participant by the number of shares having a Fair Market Value equal to the Exercise Price; or (e) any combination of the foregoing methods.
Shares of Common Stock shall be issued to the Participant (or the Participant’s legal representative, estate, or heir) as soon as practicable after exercise and payment, subject to the Company’s receipt of all required tax withholding amounts. No Participant shall have any rights as a stockholder with respect to shares subject to an Option until such shares are actually issued to the Participant.
10. Adjustment of Shares
In the event of any stock dividend, stock split, reverse stock split, recapitalization, combination, reclassification, or similar change in the capital structure of the Company, or in the event of any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation, or other distribution of assets (including a special or extraordinary dividend), issuance of rights or warrants to purchase securities, or any other corporate transaction or event having an effect similar to any of the foregoing, the Committee shall make appropriate and proportionate adjustments, in its sole discretion, to: (a) the aggregate number and type of shares of Common Stock subject to the Plan; (b) the number and type of shares subject to each outstanding Award and the Exercise Price thereof, if applicable; (c) the ISO share limit set forth in Section 4; and (d) any other terms of an Award that the Committee determines require adjustment.
The Committee’s determination with respect to any such adjustments shall be final, conclusive, and binding on all persons. No fractional shares shall be issued as a result of any such adjustment; the Committee may, in its discretion, round down to the nearest whole share or make a cash payment in lieu of any fractional share. Except as expressly provided herein, no issuance by the Company of shares of stock of any class shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Award.
11. Change of Control
For purposes of this Plan, a “Change of Control” shall mean the occurrence of any of the following events: (a) any “person” (as defined in Section 13(d) of the Exchange Act), other than the Company, any trustee or fiduciary holding securities under an employee benefit plan of the Company, or any entity owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then-outstanding securities; (b) the consummation of a merger, consolidation, or similar transaction involving the Company, unless the stockholders of the Company immediately prior to such transaction hold, directly or indirectly, at least fifty percent (50%) of the combined voting power of the surviving or resulting entity immediately following such transaction; (c) the consummation of a sale or disposition of all or substantially all of the assets of the Company; or (d) the individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any individual becoming a director subsequent to the Effective Date whose election or nomination was approved by at least a majority of the directors then comprising the Incumbent Board shall be treated as a member of the Incumbent Board.
Unless otherwise provided in the applicable Award Agreement, in the event of a Change of Control, the Committee may, in its sole discretion, take one or more of the following actions with respect to outstanding Awards: (a) provide that all outstanding Options shall become fully vested and exercisable; (b) provide that all Restricted Stock shall immediately vest and all restrictions thereon shall lapse; (c) cancel any outstanding Options in exchange for a cash payment equal to the excess, if any, of the Fair Market Value of the shares subject to the Option over the Exercise Price; (d) provide for the assumption or substitution of outstanding Awards by the surviving or acquiring entity; or (e) make such other adjustments as the Committee deems appropriate. In the event that Awards are assumed or substituted and the Participant’s Service is terminated without Cause or by the Participant for Good Reason within twelve (12) months following the Change of Control, all such assumed or substituted Awards shall immediately vest in full.
12. Amendment and Termination
The Board may at any time amend, alter, suspend, or terminate the Plan; provided that no such amendment, alteration, suspension, or termination shall be made without stockholder approval if such approval is required by applicable law, rule, or regulation, including the rules of any securities exchange on which the Common Stock is listed. Notwithstanding the foregoing, no amendment shall impair the rights of any Participant under any outstanding Award without such Participant’s written consent, except as otherwise provided in the Plan.
The Plan shall terminate on the tenth (10th) anniversary of the date the Plan is adopted by the Board (the “Termination Date”), unless earlier terminated by the Board. No Awards shall be granted under the Plan after the Termination Date. The termination of the Plan shall not affect Awards previously granted, and such Awards shall remain in full force and effect in accordance with their terms.
13. Tax Withholding
The Company shall have the right and obligation to deduct from any payment or settlement under the Plan, or to require the Participant to remit to the Company, an amount sufficient to satisfy all federal, state, local, and foreign taxes required by law to be withheld with respect to any taxable event arising in connection with an Award. The Committee may, in its sole discretion, permit a Participant to satisfy such withholding obligation, in whole or in part, by one or more of the following methods: (a) payment in cash; (b) having the Company withhold from the shares of Common Stock otherwise issuable or deliverable to the Participant upon exercise, vesting, or settlement of the Award a number of shares having a Fair Market Value equal to the minimum statutory withholding amount (or such greater amount as the Committee may authorize, provided such withholding would not result in adverse accounting treatment); (c) delivering to the Company shares of Common Stock already owned by the Participant; or (d) any combination of the foregoing.
Each Participant who exercises an Incentive Stock Option shall notify the Company in writing within fifteen (15) days of any disposition of shares acquired pursuant to such exercise that occurs within two (2) years from the date of grant or one (1) year from the date of exercise (a “Disqualifying Disposition”). The Company shall not be obligated to advise any Participant of the existence of the tax consequences associated with any Award, and each Participant is solely responsible for obtaining tax advice from the Participant’s own tax advisors.
14. General Provisions
No Right to Continued Service. Nothing in the Plan or any Award Agreement shall confer upon any Participant any right to continue in the employ or service of the Company or any Affiliate, or shall interfere with or restrict in any way the rights of the Company or any Affiliate to terminate the Participant’s employment or service at any time, with or without Cause, subject to the terms of any separate written agreement between the Company and such Participant.
Nontransferability. Unless otherwise determined by the Committee, Awards granted under the Plan shall not be transferable other than by will or the laws of descent and distribution, and during the lifetime of a Participant, Options may be exercised only by the Participant or, in the event of the Participant’s legal incapacity, by the Participant’s guardian or legal representative.
Governing Law. The Plan and all Award Agreements shall be governed by and construed in accordance with the laws of the State of [GOVERNING LAW STATE], without regard to its conflict of laws principles.
Section 409A Compliance. The Plan and all Awards granted hereunder are intended to comply with, or be exempt from, the requirements of Section 409A of the Code, and the Plan shall be interpreted and administered accordingly. In no event shall the Company or any Affiliate be liable to any Participant for any tax, interest, or penalty imposed under Section 409A of the Code.
Effective Date. The Plan shall be effective as of [EFFECTIVE DATE] (the “Effective Date”), subject to approval by the Company’s stockholders within twelve (12) months before or after the date the Plan is adopted by the Board. Awards may be granted under the Plan prior to stockholder approval; provided that no such Award shall be exercisable, vested, or settled prior to such stockholder approval, and if such approval is not obtained, all Awards shall be cancelled and void.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed by its duly authorized officer as of the date first set forth above.
[COMPANY NAME]
By: _____________________________________
Name: [AUTHORIZED OFFICER NAME]
Title: [TITLE]
Date: [DATE]