A Stock Incentive Plan (SIP) is used to grant company equity to eligible grantees. Although there can be many reasons to grant stock or options, the general purpose is to attract, retain, and motivate people who are expected to make important contributions to your company. To learn more about Stock Incentive Plans, check out this article. If you'd like to upload an existing Stock Incentive Plan, follow these steps here.

This workflow will allow you to create and approve either a new Stock Incentive Plan or upload an existing Plan approved outside of the system, pursuant to which the company can grant incentive stock options (ISOs), non-qualified stock options (NQOs), and restricted stock (RSAs).

• Setting up a new SIP
• Amending a SIP

Setting Up A New SIP

To get started, select "Start New Workflow" from your company workspace, and then choose "Set Up Stock Incentive Plan" under the Equity heading.

Enter your plan details. Add your Stock Incentive Plan (“SIP”) name and the number of shares to be allocated.

NOTE: The number of Authorized Shares allocated to your Plan is generally decided in consultation with lawyers, mentors, members of the Board, and others.

Check Constraints on New Stock Incentive Plan. The system uses the formula shown to compare the number of Shares requested for the Stock Incentive Plan to the number of available Authorized Shares. The comparison is to ensure that the Shares requested are less than or equal to the number of authorized shares. If you have any questions, you should contact your legal counsel.

Set Grant Form Defaults. Here you will set the initial defaults for the Grant Form template used during the 'Grant Shares' workflow. 

During this step you will set the following grant form defaults:

• Vesting Period: the number of years over which vesting stock is distributed.
• Vesting Frequency: the frequency with which vesting stock is granted.
• Include Vesting Cliff: a typical option vesting scheme spans 4 total years (sometimes 5) with a 1 year initial cliff. A 1 year cliff means no shares vest until the first anniversary of your start date. An employee’s shares do not vest until the cliff ends, at which point all of the shares that should have been vested during this time become vested at once. After that, vesting typically occurs monthly or quarterly over the remaining period. For example, say you are awarded an option to purchase 4,800 shares of common stock subject to a 4-year vesting period with a 1-year cliff. At the 1-year mark, 1,200 shares vest. If you quit or are fired before that date, no shares vest. After the 1-year mark, assuming monthly vesting, for each additional month you stay with the Company, another 100 shares vest (1/48th of the total grant).
• Cliff Duration: length of time for the vesting cliff. One year is a typical option.
• Acceleration Clause: an “acceleration clause” establishes the circumstances under which the vesting of some or all of the equity in question accelerates, typically in connection with a “change of control” of the company (e.g. sale). If the criteria set forth in the acceleration clause are met, an employee will immediately vest some portion or all of their unvested equity. For example, a single-trigger acceleration clause provides that upon a sale of the company, any then unvested options automatically and immediately vest.

What’s Next? You'll need to get your SIP approved. This can be done via written consent or a board meeting vote.

Select Method of Approval and Request Approval.

• While you were progressing through the new Stock Incentive Plan workflow, the system automatically generated the new resolutions for approval by your governance bodies.
• At this point you will select your method of approval. Please note that you can (a) upload an executed consent, (b) create a new board consent, or (c) upload a consent that still needs signatures, depending upon your specific needs.

Next Steps. Once you receive all the required approvals, your new Stock Incentive Plan will be fully set up. You can now use Grant Plan Shares on the Available Company Workflows page to grant shares to your employees, including Incentive Stock Options, Non-Qualified Stock Options, and Restricted Stock Awards.

Amending A SIP

If your Stock Incentive Plan has been set up in your account and has fit your needs appropriately, but you now want to increase the option pool, you can use this workflow to generate the appropriate documentation to expand the pool size or upload evidence of this documentation executed outside of the system.

This workflow will allow you to select the affected Stock Incentive Plan, set the number of shares to be allocated to the pool, and upload or collect the necessary approvals for this action (Board Approval and Stockholder Consent --the latter which can be waived, if applicable). If run in generative mode, an Amendment to the Stock Incentive Plan document will be drafted and sent out for signature(s). With just a few clicks and consents, your pool will be expanded at the push of a button!

Fidelity does not provide legal or tax advice.

Screenshots are for illustrative purposes only.

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