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An equity incentive program offers an employee shares of the company they work for. Shares can be awarded through stock options, stocks, warrants, or bonds.
Rule 701 is a federal exemption under the Securities Act of 1933 that allows private companies to issue securities to employees and other service providers.
An "equity-compensation plan" is a plan or other arrangement that provides for the delivery of equity securities (either newly issued or treasury shares) of the listed company to any employee, director or other service provider as compensation for services.
Rule 701 is important because if a company expects that the total aggregate sales price of stock options issued during any consecutive 12-month period will exceed $10 million, then Rule 701 requires the company to provide certain information to prospective purchasers (i.e., stock option holders who are exercising their ...
The persons to whom offers and sales of securities may be made pursuant to the Rule 701 exemption include employees;6 directors; general partners; trustees, where the issuer is a business trust; officers; and consultants and advisors, provided that such consultants and advisors render bona fide services and that such ...
Rule 701 exempts certain sales of securities made to compensate employees, consultants and advisors. This exemption is not available to Exchange Act reporting companies. A company can sell at least $1 million of securities under this exemption, regardless of its size.
Written Compensatory Benefit Plan or Contract Exempt offers and sales of an issuer's securities under Rule 701 must be made pursuant to either a written compensatory benefit plan or a written contract relating to compensation established by the issuer or its parents or majority-owned subsidiaries.